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, 1999
[ ] 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.
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(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)
216 South Alma School Rd, Suite 10, Mesa, AZ 85210
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(Address of Principal Executive Offices)
(602) 462-5900
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(Registrant's telephone number, including area code)
N/A
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(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, 1999, Diamond Equities, Inc. Registrant had 7,366,099 shares
of its $0.001 par value common stock outstanding.
Page 1 of 11 sequentially numbered pages
<PAGE>
FORM 10-Q
FIRST QUARTER 2000
DIAMOND EQUITIES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Balance Sheets - September 30, 1999 and June 30, 1999................ 3 - 4
Statements of Operations for the Three Months
Ended September 30, 1999 and 1998.................................... 5
Statement of Cash Flows - for the Three Months
Ended September 30, 1999 and 1998..... . . .......................... 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
September 30, June 30,
1999 1999
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 381,581 $ 210,035
Receivables
Trade accounts, net of allowance for doubtful
accounts of $13,606 at September 30, 1999
and June 30, 1999 255,725 199,338
Interest Receivable 15,939 15,939
Inventory 111,032 184,143
Other Receivable -- 205,000
Note Receivable-current portion 74,535 274,535
Prepaid expenses 4,929 37,744
---------- ----------
Total Current Assets 843,741 1,126,734
---------- ----------
PROPERTY AND EQUIPMENT 762,290 1,535,717
---------- ----------
OTHER ASSETS
Notes Receivable-noncurrent portion 292,363 224,388
Other Assets 192,060 147,963
---------- ----------
Total Other Assets 484,423 372,351
---------- ----------
$2,090,454 $3,034,802
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1999 1999
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 200,970 $ 330,329
Accrued expenses 16,010 62,409
Customer deposits 8,809 8,809
Accrued preferred dividends 195,897 196,774
Capital lease obligation-current portion 17,819 33,435
Current portion Long term debt 180,519 165,007
----------- -----------
Total Current Liabilities 620,024 796,763
----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations 3,872 4,378
Notes payable 101,998 114,787
----------- -----------
Total Long-term liabilities 105,870 119,165
----------- -----------
Total Liabilities 725,894 915,928
----------- -----------
MINORITY INTEREST 53,473 241,203
----------- -----------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par,
6% cumulative, non-voting, series A;
18,000 shares authorized; 350 shares
issued and outstanding, liquidation
preference of $350,000 1 1
Convertible preferred stock, non-voting,
non-cumulative series B; 20,000
shares authorized; 15,900 shares issued
and outstanding 1,605,540 1,605,540
Common stock, $.001 par value; 50,000,000
shares authorized; 7,366,099 shares issued
and outstanding 7,366 7,366
Additional paid-in capital 3,737,632 4,130,066
Accumulated deficit (4,039,452) (3,865,302)
----------- -----------
Total Stockholders' Equity 1,311,087 1,877,671
----------- -----------
$ 2,090,454 $ 3,034,802
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
----------------------------
1999 1998
----------- -----------
Net sales $ 230,562 $ 397,621
Less cost of sales 146,620 149,577
----------- -----------
Gross profit 83,942 248,044
Selling, general and administrative expenses 246,709 392,581
----------- -----------
Operating income or (loss) (162,767) (144,537)
----------- -----------
Other income and (expenses), net (9,072) (704)
Loss on investment in GoProfit (113,400) --
Minority Interest 12,828 7,984
----------- -----------
Net income (loss) before income taxes (272,411) (137,257)
Provision for income taxes -- --
----------- -----------
Net loss $ (272,411) $ (137,257)
=========== ===========
Net income or (loss) per share $ (.04) $ (.03)
=========== ===========
Weighted Average Shares Outstanding 7,366,099 4,666,099
=========== ===========
See accompanying notes to financial statements.
5
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(272,411) $(137,258)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 53,250 57,298
Minority interest (12,828) (7,984)
Unrealized loss on Investment 113,400 --
Changes in operating assets and liabilities
(net of acquisition)
(Increase) decrease in
Receivables - trade and other (44,257) (18,945)
Inventory 73,111 (50,546)
Prepaid expenses and other 1,699 2,044
Increase (decrease) in
Accounts payable (11,304) 47,689
Accrued liabilities (3,209) 960
--------- ---------
Net Cash Used in Operating Activities (102,549) (106,741)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (45) (11,495)
Cash paid for notes receivable -- --
Cash received for notes receivable (7,000) --
Cash paid for acquisition of Accurate 221,875 (375,000)
--------- ---------
Net Cash Provided by Investing Activities $ 214,830 $(386,495)
--------- ---------
See accompanying notes to financial statements.
6
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
1999 1998
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (13,399) $ (41,992)
Cash received for issuance of preferred stock 180,000 --
Cash adjustment for equity method of recording-
GoProfit (107,336) --
--------- ---------
Net Cash Provided (Used) by Financing Activities 59,265 (41,992)
--------- ---------
INCREASE (DECREASE) IN CASH 171,546 (535,228)
CASH, BEGINNING OF PERIOD 210,035 600,231
--------- ---------
CASH, END OF PERIOD $ 381,581 $ 65,003
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ 9,973
========= =========
Cash paid for interest $ 574 $ --
========= =========
See accompanying notes to financial statements.
7
<PAGE>
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,
1999, 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, 1999.
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.
CHANGE IN ACCOUNTING POLICY
During the quarter ended September 30, 1999, the GoProfit.com board of directors
authorized the issuance of common stock to employees and officers of GoProfit
pursuant to a stock option plan, thus removing Diamond Equities as a major
shareholder. Diamond currently owns 37% of the outstanding stock of GoProfit.com
and records its investment in Goprofit using the equity method. In November 1999
other shareholders of GoProfit gave Diamond their proxy vote, thus giving
Diamond voting control over GoProfit.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash and cash equivalents totaled $381,581 at September 30, 1999 compared to
$210,035 at June 30, 1999. The increase in cash was due primarily to the receipt
of cash from Note Receivables of $221,000 and the issuance of Precision Plastics
preferred stock for $180,000. The Company also used approximately $100,000 in
operations and with the change of reporting the Company's investment with
GoProfit.com using the equity method instead of consolidating the entities,
$107,000 in cash was removed from the books. The Companies current cash
requirements are for the operations of the Company, the purchase of inventory
and payments on commitments and debt. The Company also has a balloon payment of
$116,325 currently due to the sellers of Accurate Thermoplastics. During the
quarter ended September 30, 1999, the Company received $21,000 from the Tru-Tel
Note receivable, per the payment agreement, however, the Company has been
notified that Tru-Tel is going through a reorganization bankruptcy and therefore
collection on this note becomes questionable.
Long term cash requirements, other than normal operating expenses, are
anticipated for the acquisition of additional plastic operations. The Company
will need to raise additional funds from investors in order to complete
additional acquisitions. 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 2000.
The Company's principal commitments at September 30, 1999 consists of
obligations under capital leases, operating leases for facilities and
commitments incurred in connection with the acquisition of Accurate.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $230,562 with cost of sales of
$146,600, and a gross profit of $83,942, for the quarter ended September 30,
1999 as compared to revenues of $397,621 with cost of sales of $149,577 and
gross profit of $248,044 for the same period last year. The decrease in sales is
due to the decrease in operations in the plastic company, with the loss of some
major customers.
Selling, general and administrative expenses were $246,709 for the first quarter
2000 a decrease of $145,872 over the same period last year. The decrease is
primarily due to the decrease in operations for the plastics company and for
Diamond Equities.
Management anticipates that general selling and administrative expenses will
continue to remain constant.
The Company incurred a loss of $(272,411) for the first quarter 2000 compared to
a loss of $(137,257) for the same timely period a year ago. The $135,154
increase in net loss is due primarily to the $113,400 loss recorded in
connection with our investment in GoProfit.com, which is an unrecognized
non-cash loss from recording our interest in their losses.
9
<PAGE>
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 2000 is to acquire additional plastic operations and
consolidate the operations for maximum efficiency and profit and/or increase
revenues generated from our existing plastic company. The Company is also
continuing to search for other viable business operations in the internet
industry to enhance our current investment in GoProfit.com.
PART II OTHER INFORMATION
ITEM 3(b) DEFAULTS UPON SENIOR SECURITIES
The Company is 45 months in arrears ($194,023) as of November 15, 1999, in the
payment of dividends to the shareholders of the Class A 6% Preferred Stock. No
demand has yet been made on the Company by the Preferred shareholders.
10
<PAGE>
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, 1999
Diamond Equities, Inc.
By: /s/ David Westfere
----------------------------------
David Westfere, CEO and
Principal Financial Officer
11
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<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 381,581
<SECURITIES> 0
<RECEIVABLES> 255,725
<ALLOWANCES> 0
<INVENTORY> 111,032
<CURRENT-ASSETS> 843,741
<PP&E> 762,290
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,090,454
<CURRENT-LIABILITIES> 620,024
<BONDS> 0
0
1,605,540
<COMMON> 7,366
<OTHER-SE> (301,820)
<TOTAL-LIABILITY-AND-EQUITY> 2,090,454
<SALES> 230,562
<TOTAL-REVENUES> 230,562
<CGS> 146,620
<TOTAL-COSTS> 246,709
<OTHER-EXPENSES> (109,644)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (272,411)
<INCOME-TAX> 0
<INCOME-CONTINUING> (272,411)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (272,411)
<EPS-BASIC> (.04)
<EPS-DILUTED> 0
</TABLE>
