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 December 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.
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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 February 14, 2000, Diamond Equities, Inc. Registrant had 7,880,099 shares
of its $0.001 par value common stock outstanding.
<PAGE>
DIAMOND EQUITIES, INC.
FORM 10-Q
SECOND QUARTER 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Balance Sheets - December 31, 1999 and June 30, 1999 ............ 3-4
Statements of Operations for the Three and Six Months
Ended December 31, 1999 and 1998 ................................ 5
Statement of Cash Flows - for the Three and Six Months
Ended December 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
December 31, June 30,
1999 1999
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 313,893 $ 210,035
Receivables
Trade accounts, net of allowance for
doubtful accounts of $13,606 at
December 31, 1999 and June 30, 1999 61,283 199,338
Interest Receivable 15,939 15,939
Inventory 97,088 184,143
Other Receivable -- 205,000
Note Receivable-current portion -- 274,535
Prepaid expenses 4,929 37,744
---------- ----------
Total Current Assets 493,132 1,126,734
---------- ----------
PROPERTY AND EQUIPMENT 709,038 1,535,717
---------- ----------
OTHER ASSETS
Notes Receivable-noncurrent portion 364,898 224,388
Other Assets 146,300 147,963
---------- ----------
Total Other Assets 511,198 372,351
---------- ----------
$1,713,368 $3,034,802
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1999 1999
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 158,605 $ 330,329
Accrued expenses 16,932 62,409
Customer deposits 8,809 8,809
Accrued preferred dividends 195,897 196,774
Capital lease obligation-current portion 13,154 33,435
Current portion Long term debt -- 165,007
----------- -----------
Total Current Liabilities 393,397 796,763
----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations 3,181 4,378
Notes payable -- 114,787
----------- -----------
Total Long-term liabilities 3,181 119,165
----------- -----------
Total Liabilities 396,578 915,928
----------- -----------
MINORITY INTEREST 44,814 241,203
----------- -----------
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; 7,880,099 shares
issued and outstanding 7,880 7,366
Additional paid-in capital 3,851,913 4,130,066
Accumulated deficit (4,193,358) (3,865,302)
----------- -----------
Total Stockholders' Equity 1,271,976 1,877,671
----------- -----------
$ 1,713,368 $ 3,034,802
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
December 31, December 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 113,911 $ 305,683 $ 344,473 $ 703,304
Less cost of sales 64,671 171,075 211,291 320,652
----------- ----------- ----------- -----------
Gross profit 49,240 134,607 133,182 382,651
Selling, general and
administrative expenses 186,193 290,812 432,902 683,393
----------- ----------- ----------- -----------
Operating income or (loss) (136,953) (156,205) -- (300,742)
----------- ----------- ----------- -----------
Other income and (expenses), net 32,506 (6,372) 11,717 (7,076)
Loss on investment in GoProfit (45,500) -- 158,900 28,686
Minority Interest 8,659 20,702 21,487 --
----------- ----------- ----------- -----------
Net income (loss) before income taxes (141,288) (141,875) (425,417) (279,132)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (141,288) $ (141,875) (425,417) (279,132)
=========== =========== =========== ===========
Net income or (loss) per share $ (.02) $ (.03) (06) (06)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 7,366,099 4,666,099 7,366,099 4,666,099
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
December 31,
-----------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(425,417) $(279,132)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 106,514 113,681
Minority interest (21,487) (36,670)
Unrealized loss on Investment 158,900 --
Changes in operating assets and liabilities
(net of acquisition)
(Increase) decrease in
Receivables - trade and other 150,185 25,207
Inventory 87,055 30,027
Prepaid expenses and other 1,699 3,328
Increase (decrease) in
Accounts payable (53,669) 25,102
Accrued liabilities (2,938) (1,270)
--------- ---------
Net Cash Used in Operating Activities (842,000) (119,727)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (45) (12,867)
Cash paid for notes receivable -- 49,236
Cash received for notes receivable 216,875 --
Cash paid for acquisition of Accurate -- (375,000)
--------- ---------
Net Cash Provided by Investing Activities $ 216,830 $(338,631)
--------- ---------
See accompanying notes to financial statements.
6
<PAGE>
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Six Months Ended
December 31,
-------------------------
1999 1998
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $(186,478) $ 40,000
Cash received for issuance of preferred stock 180,000 85,685
Cash adjustment for equity method
of recording-GoProfit (107,336) --
--------- ---------
Net Cash Provided (Used) by Financing
Activities (113,814) (45,685)
--------- ---------
INCREASE (DECREASE) IN CASH 103,858 (504,043)
CASH, BEGINNING OF PERIOD 210,035 600,231
--------- ---------
CASH, END OF PERIOD $ 313,893 $ 96,188
========= =========
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>
Diamond Equities, Inc.
December 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 three months ended December 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, 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>
Diamond Equities, Inc.
December 31, 1999
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 $313,893 at December 31, 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 $165,000 to
settle the debt to the sellers of Accurate Thermoplastics 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. During
the two quarters ended December 31, 1999, the Company has received $23,000 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 December 31, 1999 consists of obligations
under capital leases and operating leases for facilities.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $113,911 with cost of sales of
$64,671, and a gross profit of $49,240, for the quarter ended December 31, 1999
as compared to revenues of $305,683 with cost of sales of $171,075 and gross
profit of $134,607 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 $186,193 for the second
quarter 2000 a decrease of $104,619 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 $(141,288) for the second quarter 2000 compared
to a loss of $(141,875) for the same timely period a year ago. The Company
recorded a 45,500 loss in connection with our investment in GoProfit.com, which
is an unrecognized non-cash loss from recording our interest in their losses.
Therefore the net loss for the current quarter is improved from that of a year
ago.
9
<PAGE>
Diamond Equities, Inc.
December 31, 1999
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, however, the second quarter is typically the slowest quarter for
Precision Plastics.
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. The current
management of the Company has become the new management of GoProfit.com, and
therefore will be more involved in assisting GoProfit in obtaining it goals to
become publically traded, and enhancing its website features.
PART II OTHER INFORMATION
ITEM 3(b) DEFAULTS UPON SENIOR SECURITIES
The Company is 48 months in arrears ($194,023) as of February 14, 2000, 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>
Diamond Equities, Inc.
December 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: February 14, 2000 Diamond Equities, Inc.
By: /s/ David Westfere
---------------------------
David Westfere, CEO and
Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 313,893
<SECURITIES> 0
<RECEIVABLES> 61,283
<ALLOWANCES> 0
<INVENTORY> 97,088
<CURRENT-ASSETS> 493,132
<PP&E> 719,038
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,713,368
<CURRENT-LIABILITIES> 393,897
<BONDS> 0
0
1,605,540
<COMMON> 7,616
<OTHER-SE> (341,180)
<TOTAL-LIABILITY-AND-EQUITY> 1,713,368
<SALES> 113,911
<TOTAL-REVENUES> 113,911
<CGS> 64,671
<TOTAL-COSTS> 186,193
<OTHER-EXPENSES> (45,500)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (141,288)
<INCOME-TAX> 0
<INCOME-CONTINUING> (141,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (141,288)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
