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 March 31, 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.
------------------------------------------------------
(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
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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 March 31, 1999, Diamond Equities, Inc. Registrant had 4,966,099 shares of
its $0.001 par value common stock outstanding.
Page 1 of 11 sequentially numbered pages
<PAGE>
FORM 10-Q
THIRD QUARTER 1999
DIAMOND EQUITIES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Balance Sheets - March 31, 1999 and June 30, 1998................. 3-4
Statements of Operations for the Three and Nine Months
Ended March 31, 1999 and 1998..................................... 5
Statement of Cash Flows - for the Nine Months
Ended March 31, 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
2
<PAGE>
DIAMOND EQUITIES, INC.
Balance Sheets
ASSETS
March 31, June 30,
1999 1998
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 97,532 $ 600,231
Certificates of Deposit 262,873 505,404
Receivables
Trade accounts, net of allowance for doubtful
accounts of $35,588 at March 31, 1999 and
June 30, 1998 319,873 10,560
Inventory 147,042 5,400
Prepaid expenses 1,783 5,111
Note Receivable-current portion 208,750 35,750
---------- ----------
Total Current Assets 1,037,853 1,162,456
---------- ----------
PROPERTY AND EQUIPMENT 955,781 197,162
---------- ----------
OTHER ASSETS
Notes Receivable-noncurrent portion 243,388 405,625
Deposits 1,000 --
Investments 5,000 66,000
---------- ----------
Total Other Assets 249,388 471,625
---------- ----------
$2,243,022 $1,831,243
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1999 1998
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 371,735 $ 111,234
Accrued expenses 13,138 8,473
Line of Credit 195,000 250,200
Current Portion Long Term Debt 264,390 21,362
Accrued preferred dividends 194,023 194,023
----------- -----------
Total Current Liabilities 1,038,286 585,292
----------- -----------
LONG-TERM LIABILITIES
Captial Lease obligations 134,202 10,150
Notes payable 414,742 --
Current Portions Long-term Debt (264,390) --
----------- -----------
Total Long-Term Liabilities 284,554 10,150
----------- -----------
Total Liabilities 1,322,840 595,442
----------- -----------
MINORITY INTEREST 52,362 66,975
----------- -----------
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 1,787,298 --
Common stock, $.001 par value; 50,000,000
shares authorized; 4,966,099 shares
issued and outstanding 4,966 4,666
Additional paid--in capital 2,612,275 2,582,282
Accumulated deficit (3,536,719) (3,235,713)
----------- -----------
Total Stockholders' Equity 867,820 1,168,826
----------- -----------
$ 2,243,022 $ 1,831,243
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 396,170 $ -- $ 1,099,474 $ --
Less cost of sales 137,286 -- 457,938 --
----------- ----------- ----------- -----------
Gross profit 258,885 -- 641,536 --
Selling, general and administrative
expenses 254,945 83,625 938,338 292,080
----------- ----------- ----------- -----------
Operating income or (loss) 3,940 (83,625) (296,802) (292,080)
----------- ----------- ----------- -----------
Other income and (expenses), net (11,795) 11,925 (18,871) 44,849
Income (loss) from Discontinued Operations -- -- (33,196)
Minority Interest (14,391) 14,295
Gain on sale of assets 1,000 -- 1,000 --
----------- ----------- ----------- -----------
Net income (loss) before income taxes (21,246) (71,700) (300,378) (280,427)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income or (loss) before preferred
dividends (21,246) (71,700) (300,378) (280,427)
Preferred dividends 153 -- 153 --
----------- ----------- ----------- -----------
Net loss attributed to common stock $ (21,399) $ (71,700) $ (300,531) $ (280,427)
=========== =========== =========== ===========
Net income or (loss) per share $ (.00) $ (.02) $ (.06) $ (.06)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 4,766,099 4,666,099 4,766,099 4,666,099
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
March 31,
-------------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (300,531) $(280,427)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority Interest 128,072 --
Depreciation and amortization 19,714 4,443
Changes in operating assets and liabilities
(Increase) decrease in
Receivables-- trade and other (84,400) (13,396)
Inventory (58,074) --
Prepaid expenses and other 3,328 (1,000)
Increase (decrease) in
Accounts payable 83,642 (566)
Accrued liabilities 4,665 (143,074)
--------- ---------
Net Cash Used in Operating Activities (203,584) (434,020)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (12,867) (8,345)
Proceeds from sale of assets 50,759 --
Cash paid for investments (375,000) (5,000)
Cash paid for notes receivable -- (15,750)
Cash received from CDS 256,955 --
Cash paid for CDs -- (250,000)
--------- ---------
Net Cash Used by Investing Activities $ (80,153) $(279,095)
--------- ---------
See accompanying notes to financial statements.
6
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
March 31,
-------------------------
1999 1998
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash advanced from Lines of Credit $ 40,000 $ --
Principal payments on notes payable (163,609) --
Cash paid on Line of Credit (95,200) --
Dividends paid (153) --
--------- ----------
Net Cash Provided (Used) by Financing
Activities (218,962) --
--------- ----------
INCREASE (DECREASE) IN CASH (502,699) (713,115)
CASH, BEGINNING OF PERIOD 600,231 1,586,983
--------- ----------
CASH, END OF PERIOD $ 97,532 $ 873,868
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ --
========= ==========
Cash paid for interest $ 40,569 $ 915
========= ==========
See accompanying notes to financial statements.
7
<PAGE>
Diamond Equities, Inc.
March 31, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
Diamond Equities, Inc. (the "Company") has elected to omit substantially all
footnotes to the financial statements for the nine months ended March 31, 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, 1998.
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.
ACQUISITION OF ACCURATE THERMOPLASTICS
Effective July 21, 1998, the Company acquired the assets and assumed various
debts and leases of Accurate Thermoplastics, Inc. (Accurate), a plastics
injection molder in Mesa, Arizona. The Company paid $375,000 in cash, issued a
note for $185,000, assumed capital leases in the amount of $185,734 and notes of
$94,639. The Company also signed a consulting commitment for $5,000 per month
for 48 months to the previous owner as part of the acquisition. A commitment
liability was recorded for $205,679 (the present value of the payments).
Accounts payable of $176,859 were also assumed.
For the above payments, notes and assumptions, the Company received accounts
receivable of $224,913, Inventory of $83,567 and fixed assets of $914,430.
8
<PAGE>
Diamond Equities, Inc.
March 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
With the two acquisitions of plastic injection molding companies, the operations
of the Company have changed significantly as compared to the same period a year
ago, when the Company was merely looking for business opportunities. With the
increased operations however, there is also an increase in commitments and cash
requirements.
Cash and cash equivalents totaled $97,532 at March 31, 1999 compared to $600,231
at June 30, 1998. The decrease in cash was due primarily to the acquisition of
Accurate wherein $375,000 was disbursed. The Company also used approximately
$200,000 in operations and $250,000 in payments on debt. During the past nine
months the Company has withdrawn $40,000 on its line of credit, and cashed a
certificate of deposit of $262,000. The Company's 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 $145,000
currently due from the acquisition of Accurate. The Company has one Certificate
of Deposit totaling $262,000 securing a line of credit. There is $67,000
available to borrow on the line of credit at March 31 1999. The CD has not been
included in the cash balances disclosed above.
In February 1999, the Company reached a settlement with Tru-Tel Communications
on the delinquent note receivable held by the Company. The settlement provides
for $100,000 to be paid in April 1999, and monthly installments to begin in July
1999 of approximately $7,900 for 48 months. This will assist the Company with
its current and future cash requirements.
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 1999.
The Company's principal commitments at March 31, 1999 consist of obligations
under capital leases, operating leases for facilities and commitments incurred
in connection with the acquisition of Accurate.
9
<PAGE>
Diamond Equities, Inc.
March 31, 1999
RESULTS OF OPERATIONS
The Company generated revenues from the new operations of $1,099,474 with cost
of sales of $457,938, and a gross profit of $641,536 for the nine months ended
March 31, 1999. The Company's gross margin for the nine months was 58%. Because
there were no operations during fiscal 1998, there are no comparatives in this
area.
Selling, general and administrative expenses were $254,945 for the third quarter
1999, an increase of $171,320 over the same period last year. The increase is
primarily due the change in operations.
Management anticipates that general selling and administrative expenses will
continue to remain constant or decrease slightly due to the fine tuning of
operations.
The Company incurred a loss of (21,246) for the third quarter 1999 as compared
to $(71,700) for the third quarter 1998. The decrease is due to the new
operations generating revenue while the 1998 fiscal year had no revenue sources
other than interest income.
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 1999 is to fine tune and expand the operations of
Precision Plastics to make it a profitable subsidiary. Management is currently
reviewing several potential acquisition candidates in the plastics industry, and
hopes to secure the third operation in the near future. The Company is also
reviewing various start up proprietary products to acquire as a division of the
plastics molding Company. The Company will assist in bringing the products to
market as well as doing the plastic molding for the products.
Effective April 1999, the Company acquired Go Profit.com, Inc., an internet
company developing a worldwide financial search engine. The Company will
continue to develop its internet technology in hopes of generating revenue from
this source in the near future. The Company will assist Go Profit in becoming a
publicly traded company in the current calendar year, wherein it will be able to
raise the additional funds necessary to further develop its product. The Company
issued preferred stock in exchange for all issued and outstanding stock of Go
Profit in April of 1999.
PART II OTHER INFORMATION
ITEM 3(b) DEFAULTS UPON SENIOR SECURITIES
The Company is 39 months in arrears ($194,023) as of May 14, 1999, in the
payment of dividends to the shareholders of the Class A 6% Preferred Stock. The
class A Preferred shares have been replaced by Class B shares, however accrued
preferred dividends have not yet been paid. No demand has yet been made on the
Company by the Preferred shareholders.
10
<PAGE>
Diamond Equities, Inc.
March 31, 1999
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: May 14, 1999
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 97,532
<SECURITIES> 0
<RECEIVABLES> 319,873
<ALLOWANCES> (35,588)
<INVENTORY> 147,042
<CURRENT-ASSETS> 1,037,853
<PP&E> 955,781
<DEPRECIATION> (189,531)
<TOTAL-ASSETS> 2,243,022
<CURRENT-LIABILITIES> 1,038,286
<BONDS> 0
0
1,787,298
<COMMON> 4,966
<OTHER-SE> (924,444)
<TOTAL-LIABILITY-AND-EQUITY> 2,243,022
<SALES> 1,099,474
<TOTAL-REVENUES> 1,099,474
<CGS> 457,938
<TOTAL-COSTS> 457,938
<OTHER-EXPENSES> 938,338
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,569
<INCOME-PRETAX> (300,378)
<INCOME-TAX> 0
<INCOME-CONTINUING> (300,531)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,531)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
