UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee required).
For the fiscal year June 30, 1997
Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required).
For the Transition period from: to:
Commission File Number. 0-24138
DIAMOND EQUITIES, INC.
(Formerly United Payphone Services, Inc.)
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(Name of Small Business Issuer in its Charter)
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Nevada 88-0232816
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State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization
2010 E. University Drive, Ste. # 3 - Tempe, Arizona 85281
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(Address of Principal Executive Offices) (Zip Code)
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(602) 921-2760
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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Class A Warrants
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Class B Warrants
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Check whether the issuer: (1) filed all Reports 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.
Yes [X] No
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Check here if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definite proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The Issuer's revenues for the year ended June 30, 1997, were $ none .
The aggregate market value of the voting stock held by non-affiliates
(approximately 1,775,034 shares as of September 27, 1997) based upon the average
of the bid and asked prices of such stock as of September 27, 1997, as reported
on the Electronic Bulletin Board, was $0.13.
The number of shares of Common Stock of the issuer outstanding as of
September 27, 1997, was 4,666,099.
Transitional Small Business Disclosure Format (check one): Yes No [X]
Documents incorporated by Reference:
Certain exhibits required to be filed herewith are incorporated by
reference from the issuer's registration statement on Form 10-SB (Commission
file No. 0-24138) filed with the Commission on May 13, 1994. Also incorporated
by reference into this Form 10-KSB are certain exhibits filed the Company's 1996
Annual Report on Form 10-KSB, the exhibits filed with the Company's Registration
Statement on Form SB-2 (Commission File number 33-85884) filed with the
Commission on October 24, 1994, and the exhibits filed with the Company's
Current Report on Form S8-K filed with the Commission on December 1, 1996.
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TABLE OF CONTENTS
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PART I Page No.
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Item 1. Description of Business ........................................................ 3
Item 2. Description of Property ........................................................ 7
Item 3. Legal Proceedings .............................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders ............................ 8
PART II
Item 5. Market Price of and Dividends on the Registrant's Common Equity and Other
Stockholder Matters ............................................................ 8
Item 6. Management's Discussion and Analysis or Plan of Operation ...................... 9
Item 7. Financial Statements ........................................................... 11
Item 8. Changes in and Disagreements With Accountants .................................. 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons ................... 12
Item 10. Executive Compensation ......................................................... 12
Item 11. Security Ownership of Certain Beneficial Owners and Management ................. 13
Item 12. Certain Relationships and Related Transactions ................................. 15
Item 13. Exhibits List and Reports on Form 8-K .......................................... 16
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PART I
Item 1. Description of Business.
History. The Company was organized under the laws of the State of
Nevada on July 24, 1987, under the name of KTA Corporation. On September 25,
1989, the Company changed its name to United Payphone Services, Inc. At that
time, the Company was in the business of operating, servicing and maintaining a
system of privately-owned public pay telephones in Nevada. In January, 1990 the
Company expanded its operations into Arizona. In December, 1994, the Company
sold all of its pay telephone location contracts in Las Vegas, Nevada, but did
not include the pay telephone equipment. All of the Nevada equipment was then
relocated to Arizona where the Company did business under the name "U.S.
Payphone, Inc." The Company generated revenues, after the sale of its Nevada
contracts, from coin and non-coin calls made from approximately 865 telephones
located and installed throughout the State of Arizona.
On November 15, 1996, the Company sold substantially all of its fixed
assets (the "Asset Sale") to Tru-Tel Communications, L.L.C., a Nevada limited
liability company ("Tru-Tel"). Under an asset purchase agreement (the "Asset
Purchase Agreement") for $1,711,250 in cash and a secured promissory note of
$811,250 (the "Tru-Tel Note"). The Tru-Tel Note is payable on a monthly basis
commencing on February 15, 1997, and bears interest at the rate of 8% per annum.
The final payment of all accrued and unpaid interest and outstanding principal
is due on or before January 15, 2002. The Tru-Tel Note is secured by a lien on
all assets transferred in the Asset Sale and is further secured by personal
guarantees of the principals of Tru-Tel. The Company effected the Asset Sale
because the directors determined that the changing regulatory environment and
business prospects would have a negative effect on the Company's future
operations.
The Asset Purchase Agreement prohibits the Company from engaging in,
either directly or indirectly, in any business which operates public or private
pay phones within the State of Arizona. In addition, the Company may not install
or maintain any phone equipment, or provide related services, for any party to
its existing contracts, which were sold to Tru-Tel. As a result, the Company has
had no business operations since the Asset Sale and had no income in fiscal year
1997. On June 20, 1997, the company changed its name to Diamond Equities, Inc.
General. The Company intends to use its working capital to take
advantage of business opportunities which may arise from time to time.
Management anticipates that such opportunities will become available to the
Company due primarily to its status as a small, publicly-held entity with liquid
assets and to its flexibility in structuring and participating in business
opportunities. Decisions as to which business opportunities to acquire will be
made by management of the Company, which will in all probability act without the
consent, vote or approval of the Company's shareholders. The Company presently
has no agreement, understanding or arrangement to acquire or participate in any
specific business opportunity, nor has it identified any opportunities for
investigation.
Plan of Operation. The Company will seek corporate opportunities which
it finds or which are presented to it by persons or firms who or which desire to
employ the Company's funds in their business and/or obtain the perceived
advantages of a publicly-held corporation. The Company's principal business
objective will be to seek long-term growth potential in a business venture
rather than to seek immediate, short-term earnings. The Company will not
restrict its search to any specific business, industry or geographical location,
and the Company may participate in a business venture of virtually any kind or
nature. The discussion of the proposed business under this caption and
throughout this Form 10-KSB is purposefully general and is not meant to be
restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities.
The Company's working capital will be used generally for the purpose of
identifying, investigating, analyzing and acquiring business opportunities. The
Company's proposed business is sometimes referred to as a "blind pool" because
shareholders will entrust their investment monies to the Company's management
before they have a chance to analyze any ultimate use to which their money may
be applied. Consequently, the Company's potential success is heavily dependent
on the Company's management, which will have virtually unlimited discretion in
searching for and entering into business opportunities.
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Management anticipates that it may be able to participate in only one
potential business venture, due primarily to the Company's limited capital. This
lack of diversification is a substantial risk in investing in the Company
because it will not permit the Company to offset potential losses from one
venture against gains from another and will expose the Company to the
cyclicality of any business in which it invests.
The Company may seek a business opportunity in firms which have
recently commenced operations, are developing companies in need of additional
funds for expansion into new products or markets, are seeking to develop a new
product or service, or are established businesses which may be experiencing
financial or operating difficulties and are in need of additional capital. In
some instances, a business opportunity may involve the acquisition of, or merger
with a corporation which does not need substantial additional cash but which
desires to establish a public trading market for its common stock. The Company
may purchase assets and establish wholly-owned subsidiaries in various
businesses or purchase existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex. However, because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, the Company believes that there are numerous
firms seeking even the limited additional capital which the Company has and/or
the benefits of a publicly-traded corporation. The perceived benefits of a
publicly-traded corporation may include facilitating or improving the terms on
which additional equity financing may be sought, providing liquidity for the
principals of a business, creating a means for providing incentive stock options
or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes) for all shareholders, and other factors.
Business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
The Company may have insufficient capital with which to provide the
owners of business opportunities with sufficient cash or other assets. However,
the Company plans to offer owners of business opportunities the possibility of
acquiring a controlling ownership interest in a public company at substantially
less cost than is required to conduct an initial public offering. The owners of
the business opportunities will, however, incur significant post-merger or
acquisition registration costs if they wish to register a portion of their
shares for subsequent sale. The Company will also incur significant legal and
accounting costs in connection with the acquisition of a business opportunity
including the costs of preparing registration statements if required, Forms 8-K,
agreements and related reports and documents.
In connection with the acquisition of or merger with another business,
the Company may use a portion of its working capital to make short-term (less
than one year) loans to a target business. The Company will attempt to assure
that the borrower will have the ability to repay the loan within its stated term
and that the loan is either fully secured or personally guaranteed, but there
can be no assurance in this regard. The Company may make unsecured loans as well
as secured loans and, in either event, could lose its entire principal in such a
loan.
Evaluation of Opportunities. The analysis of new business opportunities
will be undertaken by or under the supervision of the officers and directors of
the Company, none of whom is a professional business analyst. In analyzing
prospective business opportunities, management will consider such matters as the
available technical, financial, and managerial resources; working capital and
other financial requirements; history of operation, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of such management;
the potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the perceived public recognition or acceptance of
products, services, or trades; name identification; and other relevant factors.
Officers and directors of the Company will meet personally with management and
key personnel of the target business as part of their investigation. To the
extent possible, the Company intends to utilize written reports and personal
investigation to evaluate the above factors. The Company may allocate a minor
portion of its working capital for the retention of outside consultants, if the
Board deems it necessary, to aid in the analysis of a business opportunity.
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Since the Company is subject to Section 13 of the Exchange Act, it will
be required to furnish certain information about significant acquisitions,
including audited financial statements for the company(s) acquired, covering
one, two or three years depending upon the relative size of the acquisition.
Consequently, acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Exchange Act are applicable.
It is anticipated that any opportunity in which the Company
participates will present certain risks. Many of these risks cannot be
adequately identified prior to selection of the specific opportunity, and the
Company must, therefore, depend on the ability of management to identify and
evaluate such risks. Certain of the opportunities available to the Company may
have been unable to develop a going concern or may be in development stage in
that they have not generated significant revenues from their principal business
activities prior to the Company's participation. In such cases, the combined
enterprises may not become going concerns or advance beyond the development
stage even after the Company's participation in the activity and the related
expenditure of the Company's findings. Many of the opportunities may involve new
and untested products, processes, or market strategies which may not succeed.
Such risks will be assumed by the Company and, therefore, its shareholders.
The Company will not restrict its search to any specific kind of firms,
but may acquire a venture which is in any stage of its corporate life,
including, but not limited to, companies in the development stage and those
already in operation. It is impossible to predict at this time the status or
maturity of any business in which the Company may become engaged through
acquisition or otherwise.
Acquisition of Opportunities. In acquiring a particular business, the
Company may become party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
purchase the stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company's directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of the
Company's shareholders.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of this transaction, the Company may agree to register such
securities either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. The issuance of substantial
additional securities and their potential sale into any trading market which may
develop in the Company's Common Stock may adversely affect the market for such
securities.
While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1954, as amended (the "Code").
In order to obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of all classes of stock
of the surviving entity. In such event, the shareholders of the Company, would
retain less than 20% of the issued and outstanding shares of the surviving
entity, which could result in significant dilution in the percent ownership of
such shareholders.
As part of the Company's investigation, officers and directors of the
Company may meet with management and key personnel of a target company, may
visit and inspect facilities, obtain independent analysis or verification of
certain information provided by such Company, check references of management and
key personnel, and take other reasonable investigative measures, to the extent
that the Company's limited financial resources and management expertise allow.
The manner in which the Company participates in an opportunity will
depend on the nature of the opportunity, the respective needs and desires of the
Company and other parties, the management of the target company, and the
relative negotiating strength of the Company and such other management.
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With respect to any mergers or acquisitions, negotiations with target
company management will be expected to focus on the percentage of the Company
which target company shareholders would acquire in exchange for their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will, in all
likelihood, hold a lesser percentage ownership interest in the Company following
any merger or acquisition. Such dilution of ownership interest may be
significant in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's shareholders, including those Unitholders who continue their
investment.
It is possible that the Company will not have sufficient working
capital to undertake any significant development, marketing, or manufacturing of
any product which may be acquired. Accordingly, following the acquisition of any
such product, the Company may be required to either seek additional debt or
equity financing or obtain funding from third parties, in exchange for which the
Company may be required to give up a substantial portion of its interest in any
acquired product. There can be no assurance that the Company will be able to
obtain additional financing or to interest third parties in providing funding
for the further development, marketing, and manufacturing of any products
acquired.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to such closing,
will outline the manner of bearing costs if the transaction is not closed, will
set forth remedies on default, and will include other terms typical in
transactions of such nature.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting, and execution of relevant
agreements, disclosure documents, and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys,
and others,. If a decision is made not to participate in a specific business
opportunity, the costs incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the participation
in a specific business opportunity, the failure to consummate that transaction
may result in the loss to the Company of the related costs incurred.
As is customary in the industry, the Company may pay a finder's fee for
locating a merger or acquisition candidate and for location of additional
financing. If any such fee is paid, it will be approved by the Company's board
of directors and will be in accordance with industry standards. This type of fee
would not be paid to any employee, officer, director or a 5% or more shareholder
of the Company.
The foregoing is a forward-looking statement within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbors
created thereby. Actual results could differ materially because of the following
factors: the inability to secure business operations; losses due to an
unprofitable new line of business; the continued employment of key management; a
change in control of the Company due to the conversion by Dingaan Holdings, S.A.
of its Series A 6% Preferred Stock or other events.
Competition. The Company will be an insignificant participant among the
firms which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's limited financial resources, the Company will
continue to be at a significant competitive disadvantage compared to the
Company's competitors. Also, the Company will be competing with a large number
of other small, blind-pool, public companies located in the Southwest and
elsewhere.
Regulation and Taxation. In view of the Sales of Assets, the Company is
no longer engaged in the telecommunications business and therefore is not
subject to regulations of such activity by the FCC and state public service
conversions.
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The Company might, in certain circumstances, be deemed to be an
investment company under the provisions of Section 3(a)(3) of the 1940 Act,
which could have substantial adverse impact on its operations. This could occur
if a significant proportion of its working capital were invested in short-term
debt instruments for longer than a one-year period and the Company had no
significant operations. The Company intends to take all reasonable steps to
avoid such classification.
The Company intends to structure a merger or acquisition in such a
manner as to minimize federal and state tax consequences to the Company and any
target company. Management of the Company will also review any mergers or
acquisitions in an effort to minimize the possibility that any merger or
acquisition will be classified as a taxable event by the Internal Revenue
Service.
Employees. The Company presently has three employees. All engaged in
management, administrative or clerical functions. The Company will also engage,
from time to time, services of outside consultants to assist it in evaluation of
prospective target companies. The Company may allocate a minor portion of its
working capital for part-time secretarial services required by the Company.
Item 2. Description of Property.
Until September, 1997 the Company maintained its offices rent-free in
office space provided by the Company's President in his home. The President did
not receive any rent, but was reimbursed for out-of-pocket expenses for
telephone use, etc., not to exceed $500.00 per month.
On September 1, 1997, the Company leased approximately 1,725 square
feet of office space, located at 2010 E. University Drive, Suite # 3, Tempe,
Arizona 85281. The term, of the lease is from September 1, 1997 through August
31, 1999. The rent for the first year is $1036.80 plus tax per month and for the
second year, $1071.36 plus tax per month.
Item 3. Legal Proceedings.
Neither the Company nor any of its properties is a party to any
material pending legal proceedings or government actions (except as set forth
below), including any material bankruptcy, receivership, or similar proceedings.
Except as set forth below, management of the Company does not believe that there
are any material proceedings to which any officer or affiliate of the Company,
any owner of record of beneficially of more than 5% of the Common Stock of the
Company, or any associate of any such director, officer, affiliate of the
Company, or security holder is a party adverse to the Company or has a material
interest adverse to the Company.
Sales Tax Appeal. In March, 1993, the Arizona Department of Revenue
issued an Arizona transaction privilege (sales) tax deficiency assessment in the
amount of $73,680 against the Company with respect to coin revenues received in
operating private pay telephones in the State of Arizona during the period from
January 1, 1990 through January 31, 1993. A timely protest was filed with the
Department seeking the abatement of the entire assessment. The principal issue
in the Company's controversy is the taxability of its coin revenues under the
telecommunications classification. The Company does not believe that the
operation of private pay telephones constitutes telecommunications because pay
telephones do not transmit signals. At the first administrative hearing, the
hearing officer for the Department ruled in favor of the Company, determining
that the operation of pay telephones did not constitute intrastate
telecommunications services. Upon review, the Director of the Department
reversed that decision and upheld the assessments. The case is now pending
before the Arizona State Board of Tax Appeals. Management believes that the
Company will incur a tax liability of approximately $130,000 upon the resolution
of this case. The Company has previously reserved an amount sufficient to pay
this tax liability.
Federal Grand Jury Indictments. On November 6, 1996, a true bill was
returned by the Grand Jury in the United States District Court in Nevada against
certain former directors and officers of the Company and other non-affiliated
individuals, who were accused of racketeering, RICO violations, securities fraud
and wire fraud. All of the
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charges against the former directors and officers arose out of alleged
activities the individuals while serving as directors and officers of the
Company. The Company is not a party of and was not named as a defendant in the
indictments. However, because the indictments relate to activities alleged to
have been perpetrated by then officers and directors of the Company, there can
be no assurance that the indictments ultimately will not have a material adverse
effect on the Company.
The persons named in the indictments as discussed in prior 10-KSB
filings, are no longer officers, directors or control persons of the Company.
The government informed the Company on August 21, 1996 that Mr. and
Mrs. Westfere, the Company's then current Chief Executive Officer and
Secretary/Treasurer, were neither subjects or targets of the grand jury
investigation, and the government did not contact any other then current
officers or employees concerning the investigation. The government has not
informed the Company as to the relief, if any, to be sought. The Company
complied with the subpoena duces tecum (to produce Company records and
documents) it received and cooperated with the government's investigation. The
Company is presently unable to assess the potential liability, if any, to the
Company as a result of activities which are the subject of the above
investigation.
Breach of Contract Litigation. In connection with the sale of its
pay-telephone operations, the Company received a promissory note in the
principal sum of $811,250. Monthly payments of $14,000 on the note were to
commence on February 15, 1997. No payments on the note have been received. On
March 18, 199'/ a complaint for breach of contract was filed with the Eighth
Judicial District Court of Clark County, Nevada. The complaint alleges an
anticipatory breach by the defendant, Tru-Tel Communications, LLC, issuer of the
promissory note. The complaint also names as party defendants, the principals of
Tru-Tel Communications, LLC and Finova Capital Corporation (provider of the
financing used to purchase the assets.)
The defendants have responded by issuing counterclaims. The
counterclaims allege that the revenues of the Company reported to Tru-Tel
Communications, LLC and Finova Capital Corporation were purportedly overstated
at the time of the asset purchase agreement. The Company intends to vigorously
contest the counterclaims and pursue the original claims against all party
defendants. While it is not feasible at this time to predict or determine the
ultimate financial outcome of the complaint, management does not believe that
the Company will be party to any unfavorable judgments.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fiscal year ended June 30, 1997, to
a vote of the Company's security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is currently traded in the over-the-counter
market and is quoted on the OTC Bulletin Board. According to information
provided to the Company, during the fiscal year ended June 30, 1997, only
112,000 shares of the Company's Common Stock were traded on the Bulletin Board.
The Company therefore believes that there is no established public trading
market for the Company's Common Stock. The Company also believes that there are
only five market makers which currently make a market in the Company's Common
Stock. These quotations reflect inter-dealer prices, without retail markup,
markdown, or commission and may not necessarily represent actual transactions.
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Quarter High Low
Fiscal Year ended First $0.75 $0.50
June 30, 1996 Second $0.63 $0.50
Third $0.69 $0.50
Fourth $0.82 $0.50
Fiscal Year ended First $0.50 $0.25
June 30, 1997 Second $0.25 $0.19
Third $0.19 $0.13
Fourth $0.13 $0.13
As of September 27, 1997, there were approximately 580 holders of
record of the Company's Common Stock as reported to the Company by its transfer
agent.
No cash dividends have been declared or paid to date on the Company's
Common Stock. As of September 27, 1996, the Company had outstanding 727 shares
of its Series A 6% Preferred Stock which had preference on any dividends paid.
The Company paid no dividends on its Series A 6% Preferred Stock in the fiscal
year ended June 30, 1997, and the Company has $194,023 in accrued but unpaid
dividends on such Preferred Stock for the fiscal year ended June 30, 1997.
Nevada law restricts the funds from which dividends may legally be paid. The
Company anticipates that dividends for the foreseeable future, if any, will be
limited to dividends necessary to satisfy the Company's obligations under the
issued and outstanding shares of the Company's Series A 6% Preferred Stock and
that no dividends will be paid on Company's Common Stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Results of operations for the years ended June 30, 1997 and 1996
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 1996.
The Company had net income of $1,362,863 in the fiscal year ended June
30, 1997, compared to a net loss of $92,529 in the fiscal year ended June 30,
1996. The Company had net income attributable to its Common Stock (which gives
effect to dividends accrued during such fiscal year on the Company's issued and
outstanding Series A 6% Preferred Stock) of $1,253,807 during the fiscal year
ended June 30, 1997, compared to a net loss attributable to its Common Stock of
$201,585 in the fiscal year ended June 30, 1996. The difference in net income
for the year ended June 30, 1997 is largely due to the gain recognized on the
sale of the operations of $1,688,750.
The Company's gross revenues from the discontinued operations decreased
to $835,857 in the fiscal year ended June 30, 1997, compared to $2,127,574 in
the comparable prior period, a decrease of 61%. Interest income increased to
$98,076 in the fiscal year ended June 30, 1997, compared to $2,995 in the
comparable prior period, due to the increase in cash and notes receivable. The
Company's cost of sales decreased by 65%, or to $346,775 for the year ended June
30, 1997 from $988,876 for the year ended June 3 0, 1996. As a result of the
foregoing, the Company's gross profit margins were 58.5% and 53.5% for the years
ended June 30, 1997 and 1996, respectively. Management
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believes the increase in gross profit margin resulted largely from the decrease
in coin operated pay telephone (copt) bills by converting phone bills to the
flat rate program.
The Company's selling, general and administrative expenses decreased by
42% to $744,442 for the fiscal year ended June 30, 1997 compared to $1,286,296
in the fiscal year ended June 30, 1996. The decrease is due to the change of
operations as well as a large decrease in depreciation due to the sale of
assets. The Company had a gain on the sale of equipment of $1,860,019, and
$3,625 in the fiscal years ended June 30, 1997, and 1996, respectively. The
difference was due to the sale of approximately 99% of the fixed assets of the
Company.
The Company issued 727 shares of its Series A 6% Preferred Stock to
Teletek in June 1994 in consideration for cash advances and the settlement of
certain litigation involving the Company. In 1997, these shares were sold by
Teletek to Dingaan Holdings, S.A., a major shareholder of the Company, during
the fiscal year ended June 30, 1997. The above shares require the Company to pay
a cumulative annual dividend equal to 6% of the face value of the Preferred
Stock ($1,817,591), plus accrued and unpaid dividends, until redeemed or
converted. The Company accrued $109,056 in preferred dividends during the fiscal
year ended June 30, 1997, and paid dividends of $24,088 and accrued $84,468 in
preferred dividends in the fiscal year June 30, 1996. During the year 1997, the
Company paid the note payable of $113,760 for the 1995 and 1994 fiscal year
dividends that were unpaid.
The Company's future results of operations will be materially affected
due to the change of operations and lack of significant revenues. The Company
anticipates that in the fiscal year ending June 30, 1998, that new operations
will be secured to generate sufficient revenues to cover its operating expenses.
However, no such operations have yet been identified, and management is
continuing its search for a viable merger candidate or business operations to
begin. The foregoing is a forward-looking statement within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbors
created thereby. Actual results could differ materially because of the following
factors: the inability to secure business operations; losses due to an
unprofitable new line of business; the continued employment of key management; a
change in control of the Company due to the conversion by Dingaan Holdings,
S.A., of its Series A 6% Preferred Stock or other events.
Results of Operations for the Years Ended June 30, 1996 and 1995
The Company had a net loss of $92,529 in the fiscal year ended June 30,
1996, compared to a net loss of $190,163 in the fiscal year ended June 30, 1995.
The Company had a net loss attributable to its Common Stock (which gives effect
to dividends accrued during such fiscal year on the Company's issued and
outstanding Series A 6% Preferred Stock) of $201,585 during the fiscal year
ended June 30, 1996, compared to a net loss attributable to its Conimon Stock of
$299,441 in the fiscal year ended June 30, 1995.
The Company's gross revenues increased to $2,127,574 in the fiscal year
ended June 30, 1996, compared to $2,074,244 in the comparable prior period, an
increase of 2.5% over the comparable prior period. The Company's cost of sales
increased by 3.6%, or to $988,876, for the year ended June 30, 1996 from
$954,385 for the year ended June 30, 1995. As a result of the foregoing, the
Company's gross profit margins were 53.5% and 54.0% for the years ended June 30,
1996 and 1995, respectively. The Company believes that this slight reduction in
gross profit and gross profit margin resulted largely from the decrease in
operator service revenues. The Company had miscellaneous income of $48,499 in
the year ended June 30, 1996, compared to $12,095 in the year ended June 30,
1995. The Company's Miscellaneous income includes approximately $42,000 in
income recognized from a reserve previously taken to cover potential charges
owed to AT&T.
The Company's selling, general and administrative expenses decreased by
7. 1% to $1,286,296 for the fiscal year ended June 30, 1996, compared to
$1,384,225 in the fiscal year ended June 30, 1995. This decrease was
attributable to a reduction in depreciation and amortization charges to $319,518
in the current year from $438,331 in the comparable prior period as a result of
the full depreciation and amortization of a portion of the Company's fixed
assets. This Was offset by an increase of 2.2% in the Company's general and
administrative expenses to $966,778 int he current year from $945,894 in the
comparable prior period as a result of expenses incurred in connection with the
Company's SB-2 stock offering. The Company had a gain on the sale of equipment
of $3,625 and $58,117 in the fiscal
10
<PAGE>
years ended June 30, 1996 and 1995, respectively. The gain in the comparable
prior period resulted from the sale of the Company's Las Vegas pay telephone
location contracts in December 1994.
Liquidity and Capital Resources
The Company requires capital to support the general and administrative
expenses of the Company in its search for viable operations.
At June 30, 1997, the Company had cash and cash equivalents of
$1,586,983, compared to cash and cash equivalents of $694,293 at June 30, 1996.
This increase of $892,690 resulted primarily from the sale of the payphone
operations, from which the Company received $1,688,750. The foregoing increase
in cash was offset by a net decrease in cash of $118,228 from continuing and
discontinued operations, the return of the SB-2 offering of $458,250, the payoff
of long term debt of $173,971, and the purchase of property & equipment of
$45,611.
The funding sources currently available to the Company include
potential public offerings, however, the Company has no current plans to sell
additional shares of capital stock and has no third party financing arrangements
in place. Therefore, the Company's sole source of operating capital for the
foreseeable future is likely to be from current cash reserves. Principal uses of
working capital will include payment of the Company's general and administrative
expenses and the Company's liabilities for accrued and unpaid dividends on its
outstanding shares of Series A 6% Preferred Stock.
The Company believes that its existing cash balances and net cash flows
from operations (if any) will be sufficient to meet the Company's cash
requirements for the next 12 months. However, the foregoing and the Company's
ability to operate profitably are subject to material uncertainties due to the
lack of signficant revenues and operations. See Item 6 "Results of Operations
for the Fiscal Years Ended June 30, 1997 and 1996". The Company is exploring
various business combinations, in various industries which might result in the
acquisition of one or more subsidiaries. This may materially change the cash
requirements of the Company, however the Company has not entered into any
agreement concerning the foregoing, and there may be no assurance that such an
agreement will be entered into by the Company.
Item 7. Financial Statements.
The following financial statements are attached hereto and incorporated
herein:
<TABLE>
<CAPTION>
Heading Page
------- ----
<S> <C>
Independent Auditor's Report F-3
Balance Sheets for the Years Ended June 30, 1997 and 1996 F-4
Statements of Operations for the Years Ended June 30, 1997 and 1996 F-5
Statements of Stockholder's Equity for the years ended June 30, 1997, 1996 and 1995 F-7
Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995 F-8
Notes to Financial Statements F-9
</TABLE>
Item 8. Changes in and Disagreements With Accountants.
None.
11
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
General.
The following information is provided for each of the executive
officers and directors of the Company:
David Westfere, age 31, has been a director, president and chief
executive and operating officer of the Company since April 6, 1995, and was
General Manager of Operations from January 1991 to April 1995. From 1988 until
1990 he was the route supervisor for the Company's pay telephone operation in
Bakersfield, California, and from 1990 until 1991 he was the route supervisor of
the Company's pay telephone operation in Phoenix, Arizona. From September 1984
to June 1987 Mr. Westfere attended the University of Akron.
Todd D. Chisholm, age 34, has been a director of the Company since June
27, 1995. From June 1990 until September 1992 he was employed as a staff
accountant by Orton & Company, Certified Public Accountants, and from September
1992 until June 1994 he was employed as audit manager by Jones, Jensen, Orton &
Company, Certified Public Accountants. Since June 1994 he has been self-employed
as a certified public accountant. Since April 1995 he has also been the
vice-president and chief financial officer of The Solarium, Inc., a privately
held tanning salon. Mr. Chisholm received a bachelor of arts degree in business
from the University of Utah. He has been a certified public accountant since
1992.
Mr. Westfere and Mrs. Ramona Westfere were appointed as directors of
the company on April 6, 1995 by the Company's sole remaining directors at the
time. Mr. Chisholm was appointed as a director on June 27, 1995 by the
directors. Mrs. Westfere resigned as a director and officer of the Company on
February 1, 1997.
Compliance with Section 16(a) of the Exchange Act. Beginning with the
fiscal year ended June 30, 1995, Teletek Inc., a 10% owner of the Company's
Common Stock during such fiscal year, failed to file a Form 3 on a timely basis.
Said party failed to file a Form 3 upon the Company registering its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, on or
about July 12, 1994. Teletek also failed to file a Form 5 for such fiscal year
and for the fiscal year ended June 30, 1996. Teletek sold its holdings of Common
Stock of the Company on December 1, 1996 to Dingaan Holdings, S.A..
Item 10. Executive Compensation.
The following table set forth the aggregate executive compensation
earned by or paid to current management of the Company for the fiscal year ended
June 30, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Annual Compensation
Name and Principal Positions Year Salary Bonus Other Annual Compensation
<S> <C> <C> <C> <C>
David Westfere, President (1) (2) 1997 $36,800 $ 0.00 $42,429.81 (3)
1996 $32,400 $16,000 $46,972.00 (4)
1995 $32,400 $16,000 $35,031.00 (5)
</TABLE>
- -------------
(1) Mr. Westfere has been Chief Executive Officer and a director of the Company
since April 6, 1995. He was the Company's general manager of operations during
the fiscal year ended June 30, 1994 and during the portion of the fiscal year
ended June 30, 1995 prior to being appointed Chief Executive Officer of the
Company.
12
<PAGE>
(2) The Company did not pay any long-term compensation to Mr. Westfere during
the above periods.
(3) During the fiscal year 1997, the Company paid (i) health insurance premiums
of $6,429.81 and (ii), $36,000 to C&N, Inc., a company controlled by Mr.
Westfere, for management services. See "Item 12 - Certain Relationships and
Related Transactions.
(4) The Company paid health insurance premiums of $5,972 for Mr. Westfere and
his family during the fiscal year 1996. The Company also paid a total of $36,000
to C&N, Inc., a company controlled by Mr. Westfere, for management services
during such period.
(5) During the fiscal year 1995, the Company paid (i) health insurance premiums
for Mr. Westfere and his family of $ 8,331; (ii) a car allowance of $8,700 to
Mr. Westfere; (iii) fees for property management services related to the
Company's leased office and warehouse facilities of $6,000 to Mr. Westfere and
$12,000 to C&N, Inc., a corporation controlled by Mr. Westfere.
No other executive officer of the Company received any compensation
exceeding $100,000 for the fiscal years ended June 1997, 1996, 1995.
Compensation of Directors. Directors are permitted to receive fixed
fees and other compensation for their services as directors, as determined by
the Board of Directors. No such fees were paid to the Company's directors for
the fiscal year 1997.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information concerning the
Common Stock ownership as of September 27, 1997, of (i) each person who is known
to the Company to be the beneficial owner of more than five percent of the
Company's Common Stock; (ii) all directors; (iii) each of the Company's
executive officers; and (iv) directors and executive officers of the Company as
a group:
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount and Nature of Beneficial Percent of Class(8)
- ------------------------------------ -------------------------------- ----------------
Ownership
---------
<S> <C> <C>
Oak Holdings, Inc. 2,500,000 (1) 53.6%
Apartado 63685
Panama, Republic of Panama
Grafton Holdings S.A. 2,500,000 (2) 53.6%
Apartado 63685
Panama, Republic of Panama
Peter Robin Baily 2,500,000 (3) 53.6%
Apartado 6-4569
Panama City, Republic of Panama
Pedro Coronado 2,500,000 (4) 53.6%
Apartado 6-2495
Panama City, Republic of Panama
Dingaan Holdings, S.A. 992,065 (5) 21.3%(5)
Enro Canadian Center
First Floor
Marlborough Street
P.O. Box N-3802
Nassau, Bahamas
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
Todd D. Chisholm 0 N/A
50 West Broadway
Suite 1130
Salt Lake City, Utah 84101
David Westfere 20,000 (6) (7)
1725 West Third Street
Tempe, AZ 85281
Directors and Executive Officers as a Group 20,000 (7) (7)
(2 persons)
</TABLE>
- ----------------
(1) These shares are held directly and of record by Oak Holdings, Inc.
(2) These shares are held and of record by Oak Holdings, Inc., Grafton Holdings,
S.A. ("Grafton") has indicated that it has direct beneficial ownership of such
shares. However, the Company believes that Grafton has indirect ownership of
such shares as the sole corporate director of Oak Holdings, Inc.. As the sole
corporate director of Oak Holdings, Inc., Grafton has represented to the Company
that it is responsible for the management of Oak Holdings, Inc..
(3) These shares are held by and of record by Oak Holdings, Inc.. Mr. Baily has
indicated to the Company that he has indirect beneficial ownership of such
shares by virtue of being a controlling shareholder of Oak Holdings, Inc.
with Pedro Coronado.
(4) These shares are held directly and of record by Oak Holdings, Inc.. Mr.
Coronado has indicated to the Company that he has indirect beneficial ownership
of such shares by virtue of being a controlling shareholder of Oak Holdings,
Inc..
(5) These shares were previously held by Teletek, Inc., Las Vegas, Nevada, and
were sold to Dingaan Holdings, S.A. under a Stock Purchase Agreement dated
December 1, 1996, the consideration for the transfer of the securities was the
forgiveness of debt in the amount of two million dollars representing a loan
made by Dingaan Holdings, S.A., to Teletek on August 22, 1996.
Of the shares sold, a total of 992,065 shares are now held of record by Dingaan
Holdings, S.A. ("Dingaan"). Based solely upon the foregoing shares, Dingaan
currently owns approximately 21.3% of the total issued and outstanding shares of
Common Stock of the Company (4,666,099 shares). In addition, Dingaan owns 727
shares of the Company's Series A 6% Preferred Stock. These shares of Series A 6%
Preferred Stock are convertible at 75% of the average bid prices of the Common
Stock for the ten trading days immediately prior to conversion based upon the
cash amount attributable to such shares and any unpaid interest. The cash amount
of such preferred shares, plus unpaid interest, as of September 27, 1997, was
approximately $2,011,614. The average bid price of the Company's Common Stock on
the 10 trading days immediately prior to September 27, 1997 was $0.13 per share.
Therefore, based upon the conversion price of $.10 per share, the shares of
Series A 6% Preferred Stock owned by Dingaan would be convertible into a total
of 20,116,140 shares of the Company's Common Stock. In that event Dingaan would
own a total of 21,108,205 shares of Common Stock, or 85.2% of the total then
issued and outstanding shares of Common Stock of the Company.
(6) These shares are owned jointly by Mr. and Mrs. Westfere, husband and wife.
(7) Less than 1%.
(8) Percentages reflect the beneficial ownership of related parties. See above
footnotes. The above table and footnotes reflects the removal of certain
entities which no longer own 5% or more of the outstanding common stock.
14
<PAGE>
As of September 27, 1997, the Company had outstanding 727 shares of Series A 6%
Preferred Stock, all of which shares were owned of record by Dingaan Holdings,
S.A..
There are no arrangements known to the Company, the operation of which may at a
subsequent date result in a change of control of the Company. However, if at any
time Dingaan should elect to convert its shares of Series A 6% Preferred Stock
into shares of Common Stock, control of the Company would change to that entity
upon such conversion. See Footnote 5 to the Table immediately above.
Item 12. Certain Relationships and Related Transactions.
The Company pays $3,000 per month to C&N, Inc. ("C&N"), an Arizona
corporation, for management services. The Company paid C&N a total of $36,000
under this agreement during the fiscal year ended June 30, 1997. Mr. Westfere,
an officer and director of the Company, is the president of C&N, and Mr.
Westfere and his wife and their minor children are C&N's sole shareholders. The
agreement between the Company and C&N commenced on January 1, 1995, and is
renewable from year to year. The agreement was negotiated between Mr. Westfere
and former management of the Company as part of the total compensation package
for Mr. and Mrs. Westfere. It is believed that the terms of the agreement are
more favorable to Mr. and Mrs. Westfere than the Company could obtain with a
non-affiliated party.
Mr. Chisholm, a director of the Company, performs accounting services
for the Company. He is paid a flat fee of $890 per month for compilation and
payroll services and is paid an hourly fee for any additional work. It is
believed that the terms of the arrangement are at least as favorable as the
terms that could be obtained with a non-affiliated party.
On October 3, 1996, the Company and Mr. Michael G. Swan entered into a
Severance Agreement, pursuant to which (a) a prior consulting agreement was
terminated; (b) Mr. Swan is expressly prohibited from performing any services
for the company, or from representing himself to be an agent or representative
of the Company, without the prior written consent of the Company's Chief
Executive Officer; and (c) the Company agreed to pay Mr. Swan $5,000 per month
through April 1998. The Company may terminate the Severance Agreement in the
event Mr. Swan (i) breaches the Severance Agreement, (ii) is convicted of a
felony involving or related to his previous employment with the Company or
services provided by him for the benefit of or related to the Company; or (iii)
dies.
15
<PAGE>
Item 13. Exhibits List and Reports on Form 8-K.
(a) The following exhibits are furnished with this Report pursuant to
Item 601 of Regulation S-B.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
<S> <C> <C>
3(i) Articles of Incorporation as amended *
3(ii) By-Laws of the Company, as currently in effect *
3(iii) Certificate regarding Series A 6% Preferred Stock ***
3(iv) Certificate of Amendment of Articles of Incorporation, dated June 20, 1997 E-1
4(a) Form of certificate evidencing shares of Common Stock *
4(b) Form of certificate evidencing shares of Series A 6% Preferred Stock ***
10.1 Assignment and Assumption of Liabilities Agreement **
10.2 Stock Purchase Agreement dated April 3, 1995 between Oak Holdings and ****
Teletek, Inc.
10.3 Consulting Agreement dated April 6, 1995, between the Company and
Michael Swan ****
10.4 Consulting Agreement dated January 1, 1995, between the Company and
C&N, Inc. ***
10.5 Severance Agreement dated October 3, 1996 between the Company and
Michael Swan *2
10.6 Form 12b-25 dated September 27, 1997 *****
10.7 Stock Purchase Agreement between Teletek, Inc. and Dingaan Holdings, S.A. ******
dated December 1, 1996 (change in control of registrant)
27 Financial Data Schedule *3
</TABLE>
- -------------
* Incorporated by reference to the exhibits with the Company's registration
statement on Form 10-SB (Commission File No. 0-24138) filed with the Securities
and Exchange Commission on May 13, 1994.
** Incorporated by reference to the exhibits filed with the Company's 1994
annual report on Form 10-KSB (Commission File No. 0-24138) filed with the
Securities and Exchange Commission on October 13, 1994.
*** Incorporated by reference to the exhibits filed with the Company's
registration statement on Form SB-2 (Commission File No. 33-85884).
**** Incorporated by reference to the exhibits filed with the Company's Current
Report on form 8-K (Commission File No. 0-24138) filed with the Securities and
Exchange Commission on December 1, 1996.
***** Incorporated by reference to the Company's Form 12b-25 dated September 27,
1997.
16
<PAGE>
*2 Incorporated by reference to the exhibits filed with the Company's 1996
Annual Report on Form 10-KSB (Commission file No. 0-24138) filed with the
Securities and Exchange Commission on October 11, 1996.
****** Incorporated by reference to the Company's current Report is on Form 8-K
(Commission File No. 0-24138) filed with the Securities and Exchange Commission
on March 15, 1997.
(b) A Form 8-K was filed electronically by the Company on November 19,
1997 disclosing a change in security ownership by certain beneficial owners.
*3 Filed herewith and previously filed on Form 10-KSB/A on 1-20-98
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIAMOND EQUITIES, INC.
- ----------------------
Registrant
By: /s/ David D. Westfere
---------------------
David D. Westfere, President
Date: January 26, 1998
By: /s/ Todd D. Chisholm
--------------------
Todd D. Chisholm, Chief Financial Officer
Date: January 26, 1998
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: /s/ David D. Westfere
---------------------
David D. Westfere, Director
Date: January 26, 1998
By: /s/ Todd D. Chisholm
--------------------
Todd D. Chisholm, Director
Date: January 26, 1998
17
<PAGE>
FORM 10-KSB/A
DIAMOND EQUITIES, INC.
(Formerly United Payphone Services, Inc.)
EXHIBITS
3(iv) Certificate of Amendment of Articles of Incorporation
dated June 20, 1997
27 Financial Data Schedule
18
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 20 1997
No. C5649-87
---------
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock) Filed by:
UNITED PAYPHONE SERVICES, INC
--------------------------------------
Name of Corporation
We the undersigned DAVID D. WESTFERE and
-----------------------------------------------------
President or Vice President
TODD D. CHISHOLM of UNITED PAYPHONE SERVICES, INC.
---------------------------------- --------------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 10 day of JUNE, 1997, adopted a resolution to amend
the oiriginal articles as follows:
Article 5649-87 is hereby amended to read as follows:
The name of the corporation shall be: DIAMOND EQUITIES, INC.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 4,666,099: that
the said change(s) and amendment have been consented to and approved by a
majority vote of the stockholders holding at least a majority of each class
of stock outstanding and entitled to vote thereon.
/s/ David D. Westfere
--------------------------------------------
President or Vice President
/s/ Todd D. Chisholm
--------------------------------------------
Secretary or Assistant Secretary
State of Arizona )
) ss.
County of Maricopa )
On 6-10-97, personally appeared before me, a Notary Public,
David D. Westfere, who acknowledged
- --------------------------------------------------------------
Name of Person Appearing and Signing Document
that they executed the above instrument.
/s/ Laurel Anne Pearson
----------------------------------------
Signature of Notary
My Commission Expires Oct. 30, 1999
(Notary Stamp or Seal)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,586,983
<SECURITIES> 0
<RECEIVABLES> 22,192
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,650,298
<PP&E> 20,980
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,441,405
<CURRENT-LIABILITIES> 454,873
<BONDS> 0
0
1,817,591
<COMMON> 4,666
<OTHER-SE> 164,275
<TOTAL-LIABILITY-AND-EQUITY> 2,441,405
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 265,021
<LOSS-PROVISION> (206,611)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (206,611)
<INCOME-TAX> 50
<INCOME-CONTINUING> (206,661)
<DISCONTINUED> 1,852,761
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,537,244
<EPS-PRIMARY> .31
<EPS-DILUTED> .17
</TABLE>
