FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-91240
D.H. MARKETING & CONSULTING, INC.
(Name of small business issuer in its charter)
Nevada 88-0330263
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
300 Keystone Street, Hawley, PA 18428
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (717) 226-8515
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of exchanges on which registered
(None) (None)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock (Par Value $.0003 Per Share)
(Title of Class)
Check whether the issuer (1) filed all reports required 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year, ending December 31,
1997, were $4,959,312, net of discounts.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of
3/31/98, was $20,490,881.
This issuer has not been involved in a bankruptcy proceeding during the
last five years.
As of April 13, 1998, the issuer has 6,005,464 outstanding shares of
its $.0003 par value Common Stock.
Transition Small Business Disclosure Format (check one)
Yes [ ] No [x]
<PAGE>
TABLE OF CONTENTS AND CROSS REFERENCE SHEET
PART I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5 Market for Registrants' Common Equity and Related Stockholder Matters
Item 6 Management's Discussion and Analysis
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with 16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Index
<PAGE>
PART I
ITEM 1 - BUSINESS
D. H. Marketing & Consulting, Inc. (the "Company") was incorporated under
the laws of the State of Nevada on September 8, 1994 for the purpose of
acquiring D. H. Marketing & Consulting, Inc., a New York corporation (D. H.
Marketing-New York). D. H. Marketing-New York was organized on January 6, 1994
and has been actively engaged in business operations since that time. On
September 29, 1994, the Company entered into a merger agreement with D.H.
Marketing-New York in a transaction in which the Company was the surviving
entity. The Company is segmented into four distinct operations, consisting of
the burn-cleansing solution division, network marketing division, collectible &
fine art division and the acquisitions & consulting division.
Burn-Cleansing Solution Division
In 1986, the PREVOR Laboratory of Valmondois, France, developed a
revolutionary chemical burn cleaning solution. Unlike current rinsing
solutions that dilute chemicals while they continue to burn the skin and eyes,
diphoterine absorbs the burning molecules on contact, preventing additional
exposure to the skin. Diphoterine is effective on the skin and eyes for burns
resulting from caustic acids, bases and solvent. Testimonies from European
Fortune 500 Companies credit diphoterine for improving productivity, decreasing
absence, preventing permanent injury and improving employee safety.
Diphoterine is effective on the skin and eyes for burns caused by all
acids, bases and caustic solvents except white phosphor and hydrofluoric acid.
Hexafluorine was developed specifically for use against burns caused by
hydrofluoric acid. Both cleansing solutions have been in use in Europe for
more than six years. European users include Rohm and Haas, IBM, Proctor and
Gamble, BASF and DuPont. A Rhone Poulenc five year study showed use of
diphoterine decreased both the number of chemical spatters reported and the
number of employees requiring emergency treatment due to chemical burns.
Any employee exposed to acids, bases and caustic solvents is at risk of
being injured as a result of a chemical spatter. Current good manufacturing
practices require cleansing solutions be in close proximity to these employees.
But current solutions dilute and wash away only some of the chemical while the
remaining chemical continues to attack the body, causing permanent injury and
scarring. Diphoterine and hexafluorine are chemical burn cleansing solutions
that will absorb all the caustic chemical, normalizing pH levels and stop the
burning within seconds.
There were 60,000 individuals in 1993 requiring emergency treatment due to
chemical burns at an average cost of over $50,000. The Company believes that
use of diphoterine and hexafluorine in the work place will decrease the number
of individuals permanently injured from chemical spatters.
Network Marketing Division
During the second quarter of 1995, the Company became a Representative
within Universal Network, Inc.'s Network Marketing system. In the system,
representatives sell products and qualify retail sales centers with items of
intrinsic and/or collectible value. In addition, by purchasing these items,
representatives are also eligible to earn commission and/or sell products.
At the close of 1995, the Company had earned over $136,00 in commissions
and was the third largest dollar earner within the entire system. At the close
of 1996, the Company had earned over $550,000 in commissions and was the
largest dollar earner within the entire system.
The network marketing system was developed and is governed by Universal
Network, Inc., and its parent company Universal Network of America, Inc.
("Universal").
During the calendar year ending December 31, 1997, the business
relationship between Universal and D. H. Marketing matured significantly.
Universal acquired a substantial portion of its inventory from the Company,
totaling $4,986,554, thereby becoming the Company's largest customer of its
Collectibles and Fine Art Division, concurrent with the Company's continued
performance as Universal's largest Distributor within the Network Marketing
system. D. H. Marketing, through satisfaction of open receivables from
Universal with that company's Treasury Stock, became a shareholder of
Universal.
On December 31, 1997, D. H. Marketing & Consulting, Inc. acquired the
balance of all the issued and outstanding capital stock of Universal Network of
America, Inc. through a stock exchange agreement. Universal Network of America,
Inc. now operates as, and functionally is, a wholly-owned subsidiary of D. H.
Marketing & Consulting, Inc.
Collectible Division
The Company's collectible and fine art division is involved with the
purchase and sale of valuable and rare stamps, coins, fine art and other
tangible asset collectibles. Principals of the Company are experts at locating
and negotiating transactions to acquire investment-grade collectibles. Clients
are then able to purchase these items directly from the Company. By selecting
only the most valuable, highest quality, and most collectible pieces, both the
Company and its clients profit from the transaction.
Total revenue for this division totaled just over $58,000 in 1995, over
$1,172,698 in 1996 and $2,035,611 in 1997, having been discounted in 1997 to
eliminate sales of inventory to Universal Network, Inc., now a wholly-owned
subsidiary of the Company. The substantial increase in sales was partially
attributable to time. This division commenced activity already one half way
through 1995. However, this gain in sales is more attributable to the Company's
increased ability to participate in more sizable and profitable activities as a
result of its increased asset base and cash position.
Acquisitions and Consulting Division
The Acquisitions and Consulting Division commenced activities late in the
third quarter of 1996, acquiring 42% of Qualtronics Corporation, Inc., a
contract manufacturer of electromechanical and electronic devices, as well as
providing consultation services to Universal Network, Inc. and Qualtronics
Corporation, Inc. The Company acquired an additional 55% of Qualtronics
Corporation, Inc. on January 9, 1997. On February 5, 1998, the Company sold its
total interest in Qualtronics Corporation, Inc.
The Company also acquired all the issued and outstanding capital stock of
Universal Network of America, Inc. throughout 1997. Immediate future activity
in this division is not expected as the Company allocates all available
resources toward developing its Network Marketing operations through its newly
acquired subsidiary, Universal Network of America, Inc. and that company's
subsidiary, Universal Network, Inc.
ITEM 2 - PROPERTIES
From February 1, 1996 to January 31, 1998, the Company leased
approximately 2,600 square feet in Milford, Pennsylvania. The Company is
currently leasing approximately 1,200 square feet in Hawley, Pennsylvania at an
annual cost of $4,800. The current lease expires January 31, 1999.
The Company had also occupied approximately 1500 square feet of space in
Las Vegas, Nevada from December, 1996 through December 31, 1997.
The Company has re-opened an office of approximately 1,000 square feet in
Vancouver, British Columbia for its Canadian subsidiary, FCS, at an annual cost
of $4,500.
The Company's subsidiary, Universal Network, Inc., occupies both an office
and warehouse space in Sarasota, Florida totaling approximately 6,000 square
feet at an annual cost of $67,152. Current commitments on the properties will
expire December 1, 1998 for the office space and May 1, 1999 for the warehouse
space.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no such action by or against the Company has been
threatened.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Holders of the Common Stock are not entitled to accumulate their votes for
the election of directors or otherwise. Accordingly, the holders of a majority
of the shares present at a meeting of shareholders will not be able to elect
all of the directors of the Company and the minority shareholders will not be
able to elect a representative to the Company's Board of Directors.
PART II- OTHER INFORMATION
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Market Information - The Company's Common Stock has been quoted on
the OTC electronic Bulletin Board, under the symbol "DHMK," since January 4,
1996. As a result of a three for one forward stock split effective February 25,
1997, the symbol was changed to "DHMG."
Trading Prices - The following table shows the range of high and low
trading prices for the months of 1996 and 1997, as reported by the National
Associations of Securities Dealers (such quotations represent prices between
dealers and do not include retail markups, markdowns, or commissions and do not
necessarily represent actual transactions.):
There was no activity for the year of 1995. D. H. Marketing & Consulting
began trading in January of 1996.
These prices reflect the three for one forward stock split effective
February 25, 1997.
Trading Prices
Common Stock
Month Ended High Low
__________________________________________________________
January 31, 1996 $ 2.666 $ 1.666
February 29, 1996 $ 3 1/8 $ 2 3/8
March 29, 1996 $ 3 5/8 $ 2.979
April 30, 1996 $ 4.458 $ 3.458
May 31, 1996 $ 4.708 $ 4.291
June 28, 1996 $ 5 1/4 $ 4 3/8
July 31, 1996 $ 5.792 $ 5.083
August 30, 1996 $ 6.708 $ 5 5/8
September 30, 1996 $ 8 $ 6.542
October 31, 1996 $ 9.167 $ 7.917
November 29, 1996 $ 10 5/8 $ 9
December 31, 1996 $ 10.917 $ 8.833
January 31, 1997 $ 9.499 $ 8.916
February 28, 1997 $ 11 5/8 $ 8.999
March 31, 1997 $ 13.313 $ 11 1/4
April 30, 1997 $ 13 1/4 $ 7 1/2
May 30, 1997 $ 9 5/8 $ 8 5/8
June 30, 1997 $ 15 3/4 $ 9 1/4
July 31, 1997 $ 18 1/8 $ 10 3/4
August 29, 1997 $ 11 3/4 $ 8 1/4
September 30, 1997 $ 13 5/8 $ 9 1/16
October 31, 1997 $ 12 3/8 $ 9 3/16
November 28, 1997 $ 9 1/2 $ 7 1/8
December 31, 1997 $ 7.437 $ 3 7/8
(b) Stockholders - To date, the Company has approximately 688 confirmed
holders of record of the Company's Common Stock, although the Company believes
it has a total of approximately 750 shareholders.
(c) Dividends - To date, no dividends have been paid by the Company and the
Company does not anticipate paying dividends on its Common Stock in the
foreseeable future, but plans to retain earnings, if any, for the operation and
expansion of its business.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company's Initial Public Offering became effective with the Securities
Exchange Commission on August 11, 1995. The Company completed its initial
public offering October 11, 1995, having sold 119,000 shares and received net
proceeds of $537,990.
The proceeds of the Initial Public Offering significantly increased the
Company's working capital, cash availability, inventory and general business
capabilities. Shares first traded on the NASD Bulletin Board on January 4, 1996
at $5 per share under the symbol "DHMK." As a result of a three for one forward
stock split effective February 25, 1997, the symbol was temporarily changed to
"DHMG."
The Company is segmented into four distinct operations, consisting of the
Network Marketing Division, the Collectible Division, Acquisitions and
Consulting Division and the Burn Cleansing Solution Division. At December 31,
1995, the Company's headquarters were located in Tarrytown, New York, with
regional offices in Vancouver, British Columbia and Hawley, Pennsylvania. As of
February 1, 1996, the Company relocated its headquarters from Tarrytown, New
York to Milford, Pennsylvania. During the fourth quarter of 1996, the Company
opened a West Coast Relations Office in Las Vegas, Nevada and had plans to
reopen its offices in Vancouver, British Columbia during the second quarter of
1997. As of December 31, 1997, the Company had re-opened its Vancouver, British
Columbia office and closed its Las Vegas, Nevada office. On February 1, 1998,
the Company relocated its headquarters from Milford, Pennsylvania to Hawley,
Pennsylvania.
Selected Financial Data
Sales 1997 1996 1995
______________________________________________________________________
Network Marketing $ 483,000 $ 556,393 $ 136,425
Collectibles 2,035,611 1,172,698 58,500
Burn Cleansing Solution 38,547 38,265 50,541
Acquisitions & Consulting 448,200 250,000 0
Mechanical Assemblies 2,503,684 0 0
Total Operating Revenue, Less
Discounts 5,509,042 1,767,356 245,466
Net Gain (Loss) Before Income
Taxes 384,579 917,970 (186,082)
Net Gain (Loss) Per Share Before .10 .80 (.18)
Income Taxes
Liquidity
During 1995 and 1994, the first two years of operation, the Company
invested significant amounts of capital in formulated its business plan,
establishing market penetration and presence, and preparing and completing
its Initial Public Offering. During this two-year period, the Company
experienced insufficient levels of sales to meet operating needs. This resulted
in operating losses for 1994 and 1995 of $183,657 and $192,852 respectively.
The Company supplemented cash availability by issuing stock in 1994 through a
private placement and in 1995 through the Initial Public Offering. As a result
of this Initial Public Offering and most attributable to the subsequent
earnings of the Company throughout 1996 and continued earnings in 1997, the
Company's operating needs are more than adequately met with the current level
of sales. Total Current Assets as of December 31, 1997 totaled $7,672,482.
Capital Resources
On December 31, 1995, the Company had $382,934 in total current assets, of
which $171,098 was held in cash and cash equivalents and $142,268 was held in
inventory at the lower of cost or market value.
On December 31, 1996, the Company managed to increase total current assets
to $1,512,321, of which $147,572 was held in cash and cash equivalents,
$253,902 was held in Certificates of Deposit, $462,026 was held in Accounts
Receivable net of allowances and $496,776 was in inventory at the lower of cost
or market.
By December 31, 1997, the Company had $6,976,966 in total current assets,
of which $706,609 was held in cash and cash equivalents and $5,559,132 was held
in inventory at the lower of cost or market value.
Cash Expenditures
Total general and administrative expenses increased from 1994 to 1995 from
$183,193 to $380,000. The most significant expenditures were Salaries and
Wages, Outside Services and Consulting Fees, most of which indirectly related
to the Company's Initial Public Offering. The Company had previously reported
total general and administrative expenses for 1995 of $366,900. However, a
change in accounting policy reallocated a prior Credit of Commission advance
from General and Administrative Expenses to Other Income. There is no net
effect on earnings.
Total general and administrative expenses increased from 1995 to 1996 from
$380,000 to $528,038. The most significant increases in expenditures were
directly related to the Company's increased sales activity and business
operation, including Salaries and Wages, Office Expenditures and
Requalification of the Company's network marketing sales centers.
Total general and administrative expenses increased from 1996 to 1997 from
$528,038 ($507,109 excluding amortization and depreciation) to $2,350,736.
During 1997, the Company pursued many activities in the interests of its
shareholders, including the engagement of expert legal and financial counsel
related to its acquisition of Universal Network of America, Inc. and
divestiture of Acquisitions & Sales, Inc. (completion of the divestiture
occurred in 1998). These services where performed by unrelated parties.
Increases of general salaries and wages costs did not contribute significantly
to the increased general and administrative expenses.
Long Term Debt
The Company has satisfactorily retired all Long Term Debt. The Company's
subsidiary, Qualtronics Corporation, Inc., held long-term debt of $42,149 at
December 31, 1997. The Company has since divested itself of its interest in
Qualtronics Corporation, Inc. on February 5, 1998.
Revenue
Total revenue increased from 1994 to 1995 from $44,200 to $245,466 most
significantly as a result of the Company's network marketing division,
representing $136,425 of total revenue. In the network marketing division,
representatives qualify Retail Sales Centers with items of intrinsic value,
and earn commissions or product as the system is being built around them.
Items that can be purchased include jewelry, authentic leafs from the
First Edition of Noah Webster's American Dictionary of the English Language,
authentic leafs from original issue King James Bible and collectible numismatic
Morgan Silver dollars. Representatives then earn commissions corresponding to
the sale volume generated at their portion of the network.
Total revenue, less discounts, increased from 1995 to 1996 from $245,466
to $1,767,356, most significantly as a result of an increase in network
marketing sales from $136,425 to $556,393 and an increase in collectible sales
from $58,500 to $1,172,698. The Company also added a new division, Acquisitions
and Consulting, that attributed toward $250,000 of the total increase.
The network marketing division was in operation approximately 60% of the
1995 fiscal year. Therefore, principles expected at least a portion of the
increased revenues in 1996 from this Division.
Total revenue increased from 1996 to 1997 from $1,767,356 to $5,509,042,
of which $2,503,684 were sales recorded by its subsidiary, Qualtronics
Corporation, Inc. Total revenue increased for every division of the Company
excluding Network Marketing, which decreased 13% to $483,000. Total revenue
of collectible sales were also discounted by $4,986,554, representing sales
of inventory to Universal Network, Inc., now a wholly owned subsidiary of the
Company.
PART II - OTHER INFORMATION
ITEM 7 - FINANCIAL STATEMENTS
The consolidated Financial Statements that constitute Item 7 are included
at the end of this report, beginning on Page F-1.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company filed a Form 8-K on December 19, 1997, which is incorporated
herein by reference.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS
Director Principal Occupation
Name Since Age for various Years
- ------------------------------------------------------------------------------
David D. Hagen 1993 45 Chairman of the Board, President,
Treasurer and Chief Executive Officer
of the Company since 1993. Mr. Hagen
was the President of Hagen Development
and Improvement Corp., a real estate
company. From 1978-1982 Mr. Hagen was
the President of an investment firm in
Greenwich, Connecticut. He structured
and operated investment banking private
placement and franchising organization.
As Vice President of Sales of
International Stamp Exchange in New
York, Mr. Hagen developed an
international network for the sale and
distribution of collectible stamps,
collectible coins, and hired, trained
and expanded the sales force from 1982-
1985. From 1985-1988, Mr. Hagen was
Sales manager of International Coin
Exchange Company, located in Brooklyn,
New York. Mr. Hagen developed an
international network for the sale and
distribution of collectible coins, and
hired, trained and expanded the sales
force. From 1988-1993, Mr. Hagen has
traded coins, stamps, art and
miscellaneous investments for private
investors and investment bankers, has
owned and operated Park Avenue Fine Art
Archives among other collectible
galleries. From 1993, Mr. Hagen has
been the President of the Company, now
in Hawley, PA.
Michael J. Daily 1996 49 A director of the Company since
January, 1996 and Officer (Vice
President and Secretary) since April
10, 1997. Mr. Daily was honorably
discharged from the U. S. Army in 1969.
He majored in Business Administration
in the California College system from
1970-1973. Mr. Daily was the plant
manager of a large California based
mail order firm from 1971-1976. From
1977-1985, Mr. Daily was a manager in
the Food & Beverage industry in the
Pennsylvania Pocono Mountains. Mr.
Daily has been active in the Real
Estate Industry from 1985 to May 1995
when he joined D. H. Marketing &
Consulting, Inc. Mr. Daily was not on
the Board of Directors in 1995.
Martin Grossbach 1994 61 A director of the Company since
September 1994. In 1958, Mr. Grossbach
received a B. S. in Accounting from
Queen's College and in 1961, he
received his law degree from New York
Law School. Mr. Grossbach has been an
attorney in Westchester County, New
York for the last 32 years,
specializing in commercial real estate.
Steve Krakonchuk 1997 37 A director of the Company since June
20, 1997. Mr. Krakonchuk began working
for the Company in January of 1995 in
the Company's Investor Relations area
and as Vice President of Sales.
Davis R. Chant 1997 59 A director of the Company since June
20, 1997. Mr. Chant has been Chairman
of DRC Group and Davis R. Chant
Realtors, a full service real estate
brokerage firm, since prior to 1992.
Mr. Chant is a recognized expert in the
field of resort and second home real
estate. He has been interviewed on a
regular basis by national business
television networks as well as
nationally syndicated business
columnists.
Ronald W. Meredith 1998 54 A director of the Company since January
21, 1998. Mr. Meredith is President of
Universal Network of America, Inc. and
its subsidiary, Universal Network, Inc.
Mr. Meredith is an Air Force veteran,
having served from 1959 through 1979.
From 1979 through 1988 he owned and
operated a manufacturing company in
Louisville, Kentucky. He currently sits
on the Board of Directors of that
company. From July 1988 through 1994,
Mr. Meredith was an Independent
Representative and National Marketing
Director with an environmental products
company, where he sat on the
Presidential Advisory Board. During
this period annual sales of that
company grew from 30 million dollars to
more than 400 million dollars. From
September 1994 through February 1995,
Mr. Meredith was an Independent
Representative with a jewelry company,
and is a member of the Board of the
Jewelers Board of Trade. In may of
1995, he and several partners founded
Universal Network, Inc.
William C. Bartley 1998 48 A director of the Company since January
21, 1998. Mr. Bartley is Vice
President of Universal Network of
America, Inc. and its subsidiary,
Universal Network, Inc. Mr. Bartley
owned a successful furniture and
appliance store in Lexington, Kentucky
from 1978 until 1992. From September
1990 through March of 1994, Mr. Bartley
was an Independent Representative and
National Marketing Director with an
environmental products company. From
March of 1994 through February 1995, he
was an Independent representative and
the top income earner with a jewelry
company. Mr. Bartley, a founder of
Universal Network, Inc., was elected
Vice President in July 1995.
EXECUTIVE OFFICERS
The executive officers of the Company are elected annually at the annual
meeting of the Company's Board of Directors held after each annual meeting of
the shareholders. Each executive officer of the Company holds office until a
successor is duly elected and qualified, or until death or resignation or
removal in the manner provided by the Company's bylaws.
There are no family relationships between any of the directors and
executive officers.
There was no arrangement or understanding between any executive officer
and any other person pursuant to which any person was selected as an executive
officer.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent
(10%) of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10 percent (10%) stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
ITEM 10 - EXECUTIVE COMPENSATION.
Summary Compensation Table
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities during each of the last three fiscal years
by the Chief Executive Officer. No executive officer's salary and bonus
exceeded $100,000 in 1995, 1996 or 1997. The following information for the
Chief Executive Officer includes the dollar value of base salaries, bonus
awards, the number of stock options granted and certain other compensation, if
any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
Name and Principal Other Annual
Position at 12/31/97 Year Salary Bonus Compensation
__________________________________________________________________________
David D. Hagen 1994 - 0 - - 0 - - 0 -
President & Chief 1995 $26,291.94 $10,616.27 - 0 -
Executive Officer 1996 $40,833.33 $20,000.00 - 0 -
1997 $59,166.65 $20,000.00 - 0 -
Restricted Number of
Stock Options All Other
Awards Granted (1) Compensation
___________________________________________
1994 - 0 - - 0 - - 0 -
1995 - 0 - - 0 - - 0 -
1996 - 0 - 60,000 - 0 -
1997 - 0 - - 0 - - 0 -
(1) Number of shares indicated include the effect of a three for one
forward stock split the Company undertook February 25, 1997 and the
net effect of all options granted and transferred. 750,000 options
were issued to David D. Hagen January 7, 1997 and were transferred
to a third party on October 6, 1997. These options were then canceled
by the Company January 19, 1998.
Option Grants in the Last Fiscal Year
On September 6, 1996, the Company made available to key employees a plan
for granting options on the Company's stock. The options are for a three-year
period from September 6, 1996. Such options are fully vested to the employee.
The options will exist for restricted securities which typically require the
shareholder to hold for a period of two years before they may be sold, in whole
or in part. Options numbering 165,000 have been granted, exercisable into an
equal number of shares of common restricted stock at an exercise price of
$6 7/8 per share, the closing price of the publicly traded shares as of
September 6, 1998.
On January 7, 1997, 1,200,000 options were granted to certain key
employees of the Company. The options are for a three-year period from January
7, 1997. These options are for restricted securities, are fully vested to the
employee, and are exercisable into shares of common restricted stock at $8.92
per share.
On January 13, 1997, 750,000 options were granted to a certain individual
for a five-year period from January 13, 1997. These options are for restricted
securities, are fully vested to the employee, and are exercisable into shares
of common restricted stock at $9 per share.
On June 13, 1997, the Board of Directors authorized a transfer of an
employee's option to purchase 45,000 shares of stock at $8.917 per share. In
addition, a transfer of 750,000 options to purchase stock at $9 was authorized.
On October 6, 1997 the board authorized the transfer of the aforementioned
165,000 options and the 1,200,000 options. These options were all canceled
subsequently on January 19, 1998.
Aggregated Option Exercises in the Last Fiscal Year and the Fiscal Year-End
Option Values
Set forth below is information with respect to the un-exercised options to
purchase the Company's Common Stock held by David D. Hagen at December 31,
1997. No options were exercised during fiscal years 1994, 1995, 1996 or 1997.
Value of Unexercised
Number of Unexercised in-the-Money Options
Options at FY-End(#) at FY-End ($)(1)
_______________________________________________________
Name Exercisable Un-exercisable Exercisable Un-exercisable
_________________________________________________________________________
David D. Hagen 0 -0- $0 -0-
(1) Estimated Fair Value Per Option was based upon the Black-Scholes option
pricing model and the following assumptions for 1996 and 1997: Risk-Free
Interest Rate of 6.02%, Expected Life of 3 Years, Expected Volatility of 35%
and No Expected Dividends.
Compensation of Directors
Directors who are employees do not receive additional compensation for
service as directors. Other directors do not receive any compensation for
meetings attended or conducted via telephone conference.
Employment Contract with a Director
D. H. Marketing & Consulting, Inc. currently employs Runes Corporation,
owned by T. Christopher Ciesielka, a director and officer of the Company until
April 10, 1997, for computer consultation and general administrative services.
Total compensation for 1995 was $40,000, for 1996 was $21,667 and for 1997 was
$10,000 until the time of his resignation April 10, 1997. No other compensation
arrangements exist.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, its only class of
outstanding voting securities as of December 31, 1997, by (i) each person who
is known to the Company to own beneficially more than 5% of the outstanding
Common Stock with the address of each such person, (ii) each of the Company's
directors and officers, and (iii) all officers and directors as a group:
Name and Address of
Beneficial Owner or Amount and Nature of
Name of Officer or Director Beneficial Ownership Percent of Class
___________________________________________________________________
David D. Hagen (1), (2)
P. O. Box 621
Hawley, PA 18428 364,500 Shares 6%
Michael J. Daily (1), (2)
405 Prospect Street
Hawley, PA 18428 120,050 Shares 2.0%
Martin Grossbach (2)
303 South Broadway
Suite 100
Tarrytown, NY 10591 98,334 Shares 1.6%
Steve Krakonchuk (2), (3)
8611 General Currie Road
Apartment 111
Richmond, B. C. V6Y 3M1, Canada 307,500 Shares 5.1%
Davis R. Chant (2)
106 East Harford
Milford, PA 18337 7,300 Shares .01%
Ronald W. Meredith (2)
5647 Beneva Road
Sarasota, FL 34233-4103 381,776 Shares 6.4%
William C. Bartley (2)
5647 Beneva Road
Sarasota, FL 34233-4103 2,075 Shares 0.03%
The Company undertook a three for one forward split on February 25, 1997
resulting in a total of 3,499,341 shares to be issued. The number of shares
indicated includes the effect of this stock split.
(1) An Officer of the Company.
(2) A Director of the Company.
(3) 190,000 of these shares are in the name of Stimulus Ventures, which is
owned by Steven Krakonchuk, a director of the Company.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Until the end of January, 1996 the Company leased approximately 600 square
feet of space which was subdivided into three main offices in Tarrytown, New
York for $2,000 per month at 303 South Broadway, Suite 100, Tarrytown, New
York 10591. That office served as the both the National and the International
Headquarters for the Company.
From date of inception through August 3, 1995, Mr. David D. Hagen,
President and a director of the Company, loaned the Company approximately
$150,000. The loan has since been serviced in full.
Dave Hagen, President of the Company personally acquired all of the
outstanding shares of common stock of Financial Communication Services, a
Canadian corporation, for $10,000, which he sold to the Company for $10,000 on
a Promissory Note.
The Company will attempt to resolve any such conflicts of interest in
favor of the Company. The officers and directors of the Company are
accountable to it and its shareholders as fiduciaries, which requires that such
officers and directors exercise good faith and integrity in handling the
Company's affairs. A Shareholder may be able to institute legal action on
behalf of the Company or on behalf of itself and all similarly situated
shareholders to recover damages or for other relief in cases of the resolution
of conflicts in any manner prejudicial to the Company.
<PAGE>
PART IV
ITEM 13 - EXHIBITS INDEX
Exhibit No. Description and Method of Filing
2.0 The Merger Agreement entered into by and between D.H. Marketing &
Consulting, Inc., a New York Corporation, and the Registrant, dated
September 29, 1994, filed with the Nevada Secretary of State,
November 10, 1994 filed with SEC on April 14, 1995, in Registration
Statement and incorporated herein by reference.
3.0 Certificate of Incorporation of the Registrant, consisting of
Articles of Incorporation filed with the Secretary of State of the
State of Nevada on September 8, 1994 filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
3.1 By-Laws of the Registrant, dated September 8, 1994 filed with the
SEC on April 14, 1995, in Registration Statement and incorporated
herein by reference.
3.2 Articles of Incorporation for FCS Financial Communication Services
Inc., filed in the the Province of British Columbia, dated October
12, 1994, filed with SEC on April 14, 1995, in Registration
Statement and incorporated herein by reference.
5.0 Opinion of Max C. Tanner, Esquire, regarding legality, dated April
7, 1995, filed in Amendment No. 1 to Registration Statement and
incorporated herein by reference.
10.0 Engagement Letter between D.H. Marketing & Consulting, Inc., a
Nevada Corporation, and Max C. Tanner, Esquire, dated July 18,
1994, Filed with SEC on April 14, 1995, in Registration Statement
and incorporated herein by reference.
10.1 Stock Redemption Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and David D. Hagen, dated October 24,
1994, filed with SEC on April 14, 1995, in Registration Statement
and incorporated herein by reference.
10.2 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and All Safety and Supply, dated August
17, 1994, filed with SEC on April 14, 1995, in Registration
Statement and incorporated herein by reference.
10.3 Sales Agent Agreement between D.H. Marketing & Consulting, Inc., a
Nevada Corporation, and Jack Yee, dated July 6, 1994, filed with
SEC on April 14, 1995, in Registration Statement and incorporated
herein by reference.
10.4 Regional Sales Manager Agreement for the Western Territory between
D.H. Marketing & Consulting, Inc., a Nevada Corporation, and Billy
J. Richardson, dated June 24, 1994, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
10.5 Regional Sales Manager Agreement for the Northwest Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation,
and David J. Miller, dated August 8, 1994, filed with SEC on April
14, 1995, in Registration Statement and incorporated herein by
reference.
10.6 Marketing Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Leon Barnett & Associates, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.7 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Demoore Products & Services, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.8 Promissory Note for the amount of $87,500.00 between D.H. Marketing
& Consulting, Inc., a Nevada Corporation, and David D. Hagen, dated
February 9, 1995, filed with SEC on April 14, 1995, in Registration
Statement and incorporated herein by reference.
10.9 Distribution Agent Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Hazmat Medical Associates, LTD.,
dated July 26, 1994, filed with SEC on April 14, 1995, in
Registration Statement and incorporated herein by reference.
10.10 Regional Sales Manager Agreement for the Northeast Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation and
David J. Miller, dated August 8, 1994, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
10.11 Employment Contract Agreement between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Steven Olivieri, filed with SEC on
April 14, 1995, in Registration Statement and incorporated herein
by reference.
10.12 Independent Contractor Agreement between D.H. Marketing &
Consulting, Inc., a Nevada Corporation and Stevie Holland, filed
with SEC on April 14, 1995, in Registration Statement and
incorporated herein by reference.
10.13 Installation and Support of Accounting System Contract and
Managerial Support Contract between D.H. Marketing & Consulting,
Inc., a Nevada Corporation, and Runes Corporation, a Pennsylvania
Corporation, dated December 8, 1994, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
10.14 Amended Regional Sales Manager Agreement for the Western Territory
between D.H. Marketing & Consulting, Inc., a Nevada Corporation,
and Billy J. Richardson, dated February 21, 1995, filed with SEC on
April 14, 1995, in Registration Statement and incorporated herein
by reference.
10.15 Fund Escrow Agreement between Brighton Bank, and D.H. Marketing &
Consulting, Inc., a Nevada Corporation, dated May 1995, filed in
Amendment No. 1 to Registration Statement and incorporated herein
by reference.
10.16 Selected Dealer Agreement, filed in Amendment No. 1 to Registration
Statement and incorporated herein by reference.
10.17 Selected Dealer Agreement - Revised, filed in Amendment No. 2 to
Registration Statement and incorporated herein by reference.
21.0 Subsidiaries of the Registrant: Financial Communication Services
Inc. (FCS) a corporation organized in the Province of British
Columbia, Canada. (See Exhibit 3.2, filed with SEC on April 14,
1995, in Registration Statement and incorporated herein by
reference.
21.1 Subsidiaries of the Registrant as of December 31, 1996, filed
Form 10K-SB for the period ending December 31, 1996 and
incorporated herein by reference.
23.1 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
May 19, 1995, to the publication of their report, dated May 19,
1995, filed in Amendment No. 1 to Registration Statement and
incorporated herein by reference.
23.2 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
May 19, 1995 to the publication of their report, dated May 19,
1995, filed in Amendment No. 1 to Registration Statement and
incorporated herein by reference.
23.3 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
June 30, 1995, to the publication of their report, dated December
31, 1994, filed in Amendment No. 2 to the Registration Statement
and incorporated herein by reference.
23.4 Consent of Accountants, Niessen, Dunlap & Pritchard, P.C., dated
August 3, 1995, to the publication of their report, dated December
31, 1994, and March 31, 1995 and 1994, filed with Amendment No. 3
to the Registration Statement and incorporated herein by reference.
23.5 Consent of the Accountants, Niessen, Dunlap & Pritchard, P.C.,
dated August 8, 1995, to the publications of their report, dated
December 31, 1994, and March 31, 1995 & 1994, filed with Amendment
No. 4 to the Registration Statement and incorporated herein by
reference.
23.6 Consent of the Accountants, Niessen, Dunlap & Pritchard, P.C.,
dated March 15, 1996 to the publications of their report, dated
February 26, 1996 and December 31, 1995 & 1994, filed with Form
10-KSB for December 31, 1995 and incorporated herein by reference.
23.7 Consent, dated April 26, 1996, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated April
4, 1996, filed with SEC on May 1, 1996 in Form 10-QSB and
incorporated herein by reference.
23.8 Consent, dated July 30, 1996, of the Accountants, Niessen, Dunlap &
Pritchard, P.C., to the publication of their report, dated July 8,
1996, filed with SEC on August 7, 1996 in Form 10-QSB and on
October 16, 1996 in Form 10-QSB/A and incorporated herein by
reference.
23.9 Consent, dated October 21, 1996, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report, dated
October 3, 1996, filed with the SEC on November 6, 1996 in Form
10-QSB and incorporated herein by reference.
23.10 Consent, dated March 12, 1997, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated
January 29, 1997, filed with the SEC in Form 10-KSB for the period
ending December 31, 1996 and incorporated herein by reference.
23.11 Consent, dated April 30, 1997, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated
April 9, 1997, filed with the SEC on May 27, 1997 in Form 10-QSB/A
and incorporated herein by reference.
23.12 Consent, dated July 28, 1997, of the Accountants, Niessen, Dunlap
& Pritchard, P.C., to the publication of their report, dated
July 7, 1997, filed with the SEC on August 7, 1997 in Form 10-QSB
and incorporated herein by reference.
23.13 Consent, dated December 1, 1997, of the Accountants, Niessen,
Dunlap & Pritchard, P.C., to the publication of their report, dated
November 3, 1997, filed with the SEC in this Form 10-QSB for the
period ending September 30, 1997 and incorporated herein by
reference.
23.14 Consent, dated April 14, 1998, of the Accountants, Crouch, Bierwolf
& Chisholm, to the publication of their report, dated February 13,
1998, filed with the SEC in this Form 10-KSB for the period ending
December 31, 1997 and incorporated herein by reference.
27.1 Financial Data Schedule for the 6-month period ending June 30,
1996, filed with the SEC on October 16, 1996 in Form 10-QSB/A and
incorporated herein by reference.
27.2 Financial Data Schedule for the 9-month period ending September
30, 1996, filed with the SEC on November 6, 1996 in Form 10-QSB and
incorporated herein by reference.
27.3 Financial Data Schedule for the 3-month period ending March 31,
1997 filed with the SEC on May 27, 1997 in Form 10-QSB/A and
incorporated herein by reference.
27.4 Financial Data Schedule for the 6-month period ending June 30,
1997 filed with the SEC on August 7, 1997 in Form 10-QSB and
incorporated herein by reference.
27.5 Financial Data Schedule for the 9-month period ending September 30,
1997, filed with the SEC in the Form 10-QSB for the period ending
September 30, 1997 and incorporated herein by reference.
27.6 Financial Data Schedule for the 12-month period ending December 31,
1997, filed with the SEC in this Form 10-KSB and incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
D.H. Marketing & Consulting, Inc.
a Nevada Corporation
By: /s/ DAVID D. HAGEN Date: 4/14/98
David D. Hagen
President, Treasurer and
Chief Financial Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 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. HAGEN Date: 4/14/98
David D. Hagen
Director
<PAGE>
D H Marketing & Consulting, Inc.
And Subsidiaries
Consolidated Financial Statements
December 31, 1997 & 1996
<PAGE>
CONTENTS
Accountant's Report .......................................................3
Consolidated Balance Sheets................................................4
Consolidated Statements of Operations......................................6
Consolidated Statements of Stockholders' Equity ...........................7
Consolidated Statements of Cash Flows......................................8
Notes to the Consolidated Financial Statements............................10
<PAGE>
Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Phone (801) 363-1175
Fax (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of D.H. Marketing & Consulting, Inc.:
We have audited the accompanying consolidated balance sheet of D.H. Marketing
& Consulting, Inc. and subsidiaries as of December 31, 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The financial
statements for the year ended December 31, 1996 and 1995 were audited by other
accountants, who expressed an unqualified opinion on their report dated January
29, 1997.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of D.H. Marketing &
Consulting, Inc., and subsidiaries as of December 31, 1997 and the
results of its operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles..
/s/ CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
February 13, 1998
<PAGE>
D.H. MARKETING & CONSULTING, INC.
Consolidated Balance Sheets
ASSETS
_________
December 31 December 31
1997 1996
___________ __________
CURRENT ASSETS
Cash and Cash Equivalents $ 706,609 $ 147,572
Short-Term Investments
Certificates of Deposit - 253,902
Accounts Receivable, Net of Allowance
1997 $29,859; 1996 $2,900 245,877 462,026
Other Receivables 140,620 147,374
Tax Refunds 307,144 -
Inventory 5,559,132 496,776
Prepaid Expenses 17,584 4,671
_________ _________
Total Current Assets 6,976,966 1,512,321
_________ _________
INVESTMENTS
Investments in Qualtronics Corporation, Inc. - 466,720
Investments - Other 48,903 13,195
_________ _________
Total Investments 48,903 479,915
_________ _________
PROPERTY & EQUIPMENT
Office Furniture and Fixtures 78,069 28,086
Automobiles 19,601 -
Equipment 801,882 -
Leasehold Improvements 37,664 -
Accumulated Depreciation (515,354) ( 5,743)
_________ __________
Net Property & Equipment 421,862 22,343
_________ __________
OTHER ASSETS
Organization Costs 71,429 71,030
Client Lists 10,000 10,000
__________ _________
81,429 81,030
Less Accumulated Amortization ( 63,271) ( 46,595)
__________ _________
18,158 34,435
Deferred Tax Assets 4,053 -
Deposits and Other Assets 49,363 2,813
Goodwill 153,177 -
__________ _________
Net Other Assets 224,751 37,248
__________ _________
TOTAL ASSETS $ 7,672,482 $2,051,827
============== ===========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31 December 31
1997 1996
___________ ___________
CURRENT LIABILITIES
Accounts Payable $ 101,753 $ 5,112
Sales Tax Payable 319,283 417
Accrued Wages 132,240 1,000
Accrued and Withheld Payroll Taxes 22,323 -
Accrued Expenses 46,443 -
Accrued Income Taxes - 154,300
Current Obligations Under Capital Lease 28,309 1,127
Current portion of Notes Payable 190,476 -
__________ __________
Total Current Liabilities 840,827 161,956
__________ __________
LONG-TERM DEBT
Obligation Under Capital Lease 42,149 5,412
__________ __________
Total Long-Term Debt 42,149 5,412
__________ __________
Total Liabilities 882,976 167,368
__________ __________
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value, Authorized
75,000,000 Shares; Issued & Outstanding
6,005,464 and 3,499,341, respectively 6,005 3,499
Additional Paid-In Capital 6,768,822 1,565,714
Treasury Stock (530,000) -
Minority Interest 13,282 -
Retained Earnings 531,397 315,246
__________ __________
Total Stockholders' Equity 6,789,506 1,884,459
__________ __________
Total Liabilities and Stockholders' Equity $ 7,672,482 $2,051,827
=========== ==========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Consolidated Statements Of Operations
For the Years ended
December 31 December 31
1997 1996
___________ __________
SALES $ 4,959,312 $1,767,356
___________ __________
COST OF GOODS SOLD 2,627,738 586,650
__________ __________
GROSS PROFIT 2,331,574 1,180,706
__________ __________
OPERATING EXPENSES
General And Administrative Expenses 2,350,736 507,109
Amortization 43,510 16,206
Depreciation 59,573 4,723
_________ _________
TOTAL OPERATING EXPENSES 2,453,819 528,038
OPERATING INCOME (LOSS) (122,245) 652,668
_________ ___________
OTHER INCOME AND (EXPENSES)
Consulting Fees 448,200 250,000
Other Income 13,030 3,942
Equity Earnings in UNI (11,610) 2,825
Gain on Sale of Investments 75,000 -
Interest Income 11,793 9,279
Interest Expense (29,588) (744)
____________ ___________
Total Other Income and (Expenses) 506,825 265,302
____________ ___________
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 384,580 917,970
____________ ___________
PROVISION FOR INCOME TAXES
Federal 113,056 174,000
State 52,061 59,000
------------ -----------
Total Income Taxes 165,117 233,000
------------ -----------
INCOME BEFORE MINORITY INTEREST 219,463 684,970
Minority Interest in Net Loss of Subsidiary (3312) -
____________ ___________
NET INCOME $ 216,151 $ 684,970
============ ===========
NET INCOME PER SHARE $ .05 $ .20
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 3,957,111 3,428,943
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Statements of Stockholders' Equity
From December 31, 1995 through December 31, 1997
Additional Retained
Common Stock Paid-In Earnings Treasury Minority
Shares Amount Capital (Deficit) Stock Interest
_________________ __________ __________ ________ _________
Balance,
December 31,
1995 3,357,000 $ 3,357 $ 731,852 $(369,724) $ - $ -
Issuance of
Common Stock 142,341 142 833,862 - - -
Net Income - - - 684,970 - -
_________ _______ __________ _________ ________ ________
Balance,
December 31,
1996 3,499,341 3,499 1,565,714 315,246 - -
_________ _______ __________ _________ ________ ________
Issuance of
Common Stock
for shares of
QCI 6,000 6 (38,838) - - 9,970
Issuance of
Common Stock
for inventory 450,000 450 3,191,550 - - -
Return of
Inventory
acquired with
Stock - - - - (530,000) -
Issuance of
Common Stock
for shares of
FRAMA, Inc. 50,000 50 449,950 - - -
Issuance of
Common Stock
for Services 100,000 100 521,775 - - -
Issuance of
Common Stock
for
Acquisition
of UNI 1,900,123 1900 1,078,671 - - -
Net Income
for the year
ended Dec.
31, 1997 - - - 216,151 - 3,312
_________ _______ __________ _________ ________ ________
Balance,
December 31,
1997 6,005,464 $ 6,005 $6,768,822 $ 531,397 $(530,000) $ 13,282
========= ======= ========== ========= ========== ========
The accompanying notes are integral part of these financial statements.
-7-
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Consolidated Statements of Cash Flows
December December
31 31
1997 1996
_________ _________
Cash Flows from Operating Activities
Net Income (Loss) $ 216,151 $ 684,970
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation 59,573 4,723
Amortization 43,510 16,206
Provision for Doubtful Accounts 30,759 -
Undistributed Loss of Universal Network, Inc. 11,610 (2,825)
Minority interest in subsidiary 3,312 -
Stock issued for inventory 2,525,077 -
Stock issued for services 521,875 -
Gain on Sale of Investments (75,000) -
Change in Assets and Liabilities (Net of effects
from purchase of UNI & QCI)
(Increase) Decrease in:
Accounts Receivable (1,137,461) (414,579)
Other Receivables (294,566) (126,454)
Inventory (1,611,459) 301,416
Prepaid Expenses (8,162) (3,470)
Organization Costs - -
Deposits - (2,138)
Increase (Decrease) in:
Accounts Payable (56,193) 3,844
Accrued Expenses 61,058 (7,008)
Accrued Income Taxes (157,398) 154,300
_________ ________
Net Cash Provided (Used) by Operating Activities 132,686 608,985
_________ _________
Cash Flows from Investing Activities
Cash from short-term CD 503,902 -
Purchase of short-term Investments
Certificates of Deposit (250,000) (253,902)
Purchase of Investments (369,503) (286,610)
Purchase of Property and Equipment (47,738) (16,792)
Cash from sale of investments 200,000 -
Cash acquired in subsidiaries 405,658 -
_________ _________
Net Cash Provided (Used) by Investing Activities 442,319 (557,304)
_________ _________
Cash Flows from Financing Activities
Proceeds from debt financing 350,000 -
Net Proceeds from Issuance of Common Stock - -
Principal payments on debt financing (364,841) (74,371)
Principal Payments on Capital Lease Obligations (1,127) (836)
_________ _________
Net Cash Provided (Used) by Financing Activities (15,968) (75,207)
_________ _________
Net Increase (Decrease) in Cash and Cash Equivalents
(Forwarded) 559,037 (23,526)
_________ _________
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Consolidated Statements of Cash Flows
(Continued)
December December
31 31
1997 1996
_________ _________
Net Increase (Decrease) in Cash and Cash Equivalents
(Forwarded) 559,037 (23,526)
Cash and Cash Equivalents
Beginning 147,572 171,098
_________ _________
Ending $ 706,609 $ 147,572
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash Payments for Interest $ 366 $ 743
========= =========
Cash Payments for income taxes $ 435,961 $ -
========= =========
Supplemental Schedule of Noncash Investing and
Financing Activities
Capital Lease Obligations Incurred for
Use of Equipment $ - $ 7,375
========= =========
Purchase of Investment through
Issuance of Company Stock $ 450,000 $ 178,080
========= =========
Purchase of Inventory through
Issuance of Company Stock $3,192,000 $ 655,924
========= =========
Acquisition of investments from satisfaction
of Accounts Receivable $4,650,000 $ -
========= =========
Acquisition of Treasury Stock through return
of inventory $ 530,000 $ -
========= =========
The accompanying notes are an integral part of these financial statements
-9-
<PAGE>
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Notes to Financial Statements
December 31, 1997 and 1996
NOTE 1 - Summary of Significant Accounting Policies
a. Nature of Business
D. H. Marketing & Consulting, Inc., a New York corporation, was organized
on January 4, 1994, and was actively engaged in business operations through
September 29, 1994, when the Company merged with D. H. Marketing &
Consulting, Inc., a Nevada corporation, incorporated under the
laws of the State of Nevada on September 8, 1994, for the purpose of
acquiring D. H. Marketing, New York. The Company's operations consist of
distribution of chemical burn cleansing solutions; the purchase and sale
of valuable and rare stamps, coins, fine art, and other tangible
collectibles; network marketing; and general consultation to and possible
acquisition of small growth oriented companies. The Company markets its
products throughout the United States, Canada and Europe.
Qualtronics Corporation, Inc. (QCI), a 97%-owned subsidiary, is a contract
manufacturer, specializing in prototype and low volume electronic and
electro-mechanical assemblies, utilizing surface mount and hybrid micro-
circuit technologies. Qualtronics' customers are predominately in north-
eastern U.S.
On December 30, 1997 the Company completed a share exchange with
Universal Network, Inc. (UNI), wherein the Company issued 1,900,123
shares of common stock for the remaining 76% interest in UNI, thus
making UNI a wholly owned subsidiary of the Company. UNI is engaged
in the sale and distribution of fine art, jewelry, bank notes and
other collectables. UNI distributes its products to distributors of the
Company on a binary multi level marketing system.
b. Principles of Consolidation
The consolidated financial statements include the accounts of DH Marketing
and Consulting, its wholly-owned subsidiaries Acquisition and Sales, Inc.
(ASI) and Financial Communication Services, Inc. (FCS), Qualtronics Corp-
oration, Inc.(QCI), a 97%-owned subsidiary and Universal Network, Inc.,
(UNI) a wholly owned subsidiary at December 30, 1997. All significant
intercompany accounts and transactions have been eliminated in consolida-
tion.
Before the acquisition of UNI at December 30, 1997 the Company accounted
for its investment in Universal Network of America, Inc., by the equity
method of accounting under which the Company's share of the net loss of
the affiliate (24%) is recognized as an expense in the Company's statement
of income.
c. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents. Uninsured cash balances total
$255,072 at December 31, 1997.
9
<PAGE>
D. H. MARKETING & CONSULTING, INC.
Notes to Financial Statements
December 31, 1997 and 1996
NOTE 1 - Summary of Significant Accounting Policies (continued)
d. Property and Equipment
Property and equipment are stated at cost. Major replacements and
betterments are capitalized while maintenance and repairs are expensed as
incurred.
Depreciation is provided generally on a straight-line basis over the
estimated service lives of the respective classes of property.
e. Organization Costs
Organization expenses are recorded at cost and are being amortized on a
straight-line basis over five years. The expenses represent pre-
incorporation cost to establish the entity and develop various sales
venues. At December 31, 1997 and 1996, the net unamortized balance was
$72,030 and $28,172, respectively.
f. Client Lists
The Company acquired a client list for $10,000. These costs are being
amortized on a straight-line basis over five years.
g. The company recorded goodwill in the acquisition of QCI, due to the
excess cost over the net book value of QCI. Goodwill is being amortized
over 10 years on the straight-line method.
h. Fair Value of Financial Instruments
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are
held for trading purposes) approximate the carrying values of such
amounts.
i. Provision for Income taxes
Deferred income taxes arise from timing differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which
they relate. Deferred taxes arising from timing differences that are not
related to an asset or liability are classified as current or noncurrent,
depending on the periods in which the timing differences are expected to
reverse.
The principal sources of timing differences are different depreciation
methods used for financial accounting and tax purposes.
11
<PAGE>
D H MARKETING & CONSULTING, INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 1 - Summary of Significant Accounting Policies (continued)
i. Provision for Income taxes (continued)
The deferred tax liability and the provision for income taxes is
calculated as follows at December 31, 1997 and 1996:
December 31 December 31
1997 1996
_____________ _____________
Current provision for income taxes:
Federal $ 113,056 $ 174,000
State 52,061 59,000
Deferred - -
_____________ _____________
Total provision for income taxes $ 165,117 $ 233,000
============= ============
Deferred tax liability arising from:
Acquisition of subsidiaries:
QCI-depreciation differences 32,458 -
UNI-depreciation differences 10,812 -
_____________ ___________
Deferred tax liability 43,270 -
_____________ ___________
Deferred tax assets-current:
Net operating loss carryforward (47,323) -
_____________ ___________
Net deferred tax asset $ (4,053) $ -
============ ===========
j. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. In these financial statements, assets,
liabilities and earnings involve extensive reliance on managements
estimates. Actual results could differ from those estimates.
k. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
12
<PAGE>
D H MARKETING & CONSULTING, INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 2 - Inventory
Inventories consisted of the following:
Artwork and Collectible $ 5,500,107
Work in Process and Raw Materials-
Qualtronics Corporation, Inc. 59,025
_____________
$ 5,559,132
=============
Artwork and collectibles are valued on a specific identified cost basis,
while other inventory is valued on a first-in, first-out basis at the
lower of cost or market.
Inventory with a value of $2,662,000 was acquired by the issuance of
Company common stock during the period January 1, 1997, to December 31,
1997. Due to the acquisition of UNI by the Company, UNI's inventory held
at December 30, 1997 which was purchased from the Company was valued at
the Company's cost (predecessor cost).
NOTE 3 - Qualtronics Corporation, Inc.
On January 9, 1997, the Company acquired an additional 55% of the
outstanding common stock of Qualtronics Corporation, Inc. The Company
currently owns 97% of the stock of Qualtronics Corporation, Inc. The
full year results of operation of QCI have been included in these
consolidated financial statements since there is minimal difference from
January 9, 1997.
NOTE 4 - Lines of Credit
On March 20, 1997, the Company entered into two line of credit agreements
with a bank, due on demand, which permited borrowing up to 250,000 on each
line. At December 31, 1997, the outstanding balance of both lines are $0,
and the lines of credit have been closed.
13
<PAGE>
D H MARKETING & CONSULTING,INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 5 - Investment in Universal Network of America, Inc.
The following pro forma information combines the results of the Company
and Universal Network of America, Inc., as if the acquisition had occurred
at the beginning of the periods represented.
December 31,
____________ ____________
1997 1996
____________ ____________
(unaudited)
Sales $ 8,948,363 $11,480,589
Cost of Goods Sold 3,336,793 3,497,613
____________ _____________
Gross Profit 5,611,570 7,982,976
Selling Expenses 2,984,684 5,766,394
General and Administrative Expenses 3,632,510 1,840,487
Other Income (Expenses) 537,095 261,799
____________ ____________
Income Before Income Taxes and Minority
Interest in Net Income of Subsidiary (468,529) 637,894
Income Tax - 233,000
____________ ____________
Income Before Minority Interest in Net
Income of Subsidiary (468,529) 404,894
Minority Interest in Net Income of
Subsidiary (2,196) (1,152)
____________ _____________
Net Income $ (470,725) $ 403,742
============ ============
Net Income Per Share $ (.08) $ 0.08
Weighted Average Number of Common Shares 5,857,111 5,306,005
============ ============
Universal Network of America, Inc., has suffered cumulative losses
through December 31, 1997 of $(1,798,909).
NOTE 6 - Related Party Transaction
During the period January 1, 1997 to December 31, 1997, the Company
had various transactions with UNI which included: receipt of consulting
income of $600,000, sales of collectibles of $4,986,554, and receipt of
other payments of income of $231,400. Because these revenue were gener-
ated prior to the acquisition of UNI they have not been eliminated in the
consolidation. The sales of the Company and the inventory of UNI on hand
at December 30, 1997 was adjusted at the acquisition date. (See Note 2).
14
<PAGE>
D H MARKETING & CONSULTING, INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 6 - Related Party Transaction (continued)
The Company sold collectibles in the amount of $1,631,550 to Frama,
Inc., a shareholder during the twelve-month period ended December 31, 1997.
The shareholder paid for this transaction with the surrender of shares of
D.H. Marketing & consulting, Inc., common stock and the surrender of other
investments. The Company also sold this shareholder a mortgage option
which was paid for with shares of D.H. Marketing & Consulting common
stock, shares of common stock in UNI, and $200,000 in cash.
The Company paid $38,500 to Runes Corporation for management fees.
Runes is owned by a shareholder of the Company.
During the year the Company sold merchandise to additional companies
that are shareholders of the Company in the amount of $2,198,500. These
companies are in the art and collectibles industry and invested in the
Company's stock prior to the sale of merchandise. Approximately 88% of the
Company's revenue was generated from either UNI or other shareholders of
the Company. The shareholders and amounts are as follows:
David Hagen $ 11,000
Ildico, LTD 350,000
Fode Diope 1,631,250
Phillippe Hababou 206,250
NOTE 7 - Common Stock Split
On February 24, 1997, the Company recorded a three-for-one stock
split of the Company's common stock to shareholders of record on that
date. All per share information has been retroactively restated for the
stock split. Authorized shares have been increased to 75,000,000 shares.
NOTE 8 - Stock Options
On September 6, 1996, the Company made available to key employees a
plan for granting options on the Company's stock. The options are for a
three-year period from September 6, 1996. Such options are fully vested
when exercised. The options will exist for restricted securities which
typically require the shareholder to hold for a period of two years before
they may be sold, in whole or in part. Option numbering 165,000 have been
granted, exercisable into an equal number of shares of common restricted
stock at an exercise price of $6 7/8 per share, the closing price of the
publicly-traded shares as of September 6, 1996.
15
<PAGE>
D H MARKETING & CONSULTING, INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 8 - Stock Options (continued)
On January 7, 1997, 1,200,000 options were granted to certain key employees
of the Company. The options are for a three-year period from January 7,
1997. These options are for restricted securities, are fully vested to the
employee, and are exercisable into shares of common restricted stock at
$8.92 per share.
On January 13, 1997, 750,000 options were granted to a certain individual
for a five year period from January 13, 1997. These options are for
restricted securities, are fully vested to the individual, and are
exercisable into shares of common restricted at $9 per share.
On June 13, 1997, the Board of Directors authorized a transfer of an
employees options to purchase 45,000 shares of stock at $8.917 per share.
In addition a transfer of 750,000 option to purchase stock at $9 was
authorized.
On October 6, 1997 the board authorized the transfer of the afore mention
165,000 options and the 1,200,000 options. These options were all
canceled subsequently on January 19, 1998.
December 31,
1997
_____________
Outstanding Option (after effect of stock split)
September 6, 1996 165,000
January 7, 1997 1,200,000
January 13, 1997 750,000
______________
2,115,000
==============
No options were exercised, forfeited, or expired during the period
January 1, 1997, to December 31, 1997. The weighted-average price for
the above-noted options is $8.95 and $6.88 for 1997 and 1996, respectively.
At December 31, 1997, the Company's stock option plan was accounted for
based upon APB Opinion No. 25 and related interpretations. Accordingly, no
compensation cost has been recognized for options under these plans. Had
compensation cost for the plan been determined based on the grant date and
fair values of options, and estimated options to be exercised, reported
net income and earnings per share would have been reduced. Management
does not believe any of the current options will be exercised.
The fair value of the stock options granted during 1996 and 1997 were
determined using the Black-Scholes option pricing model and the
following assumptions for 1996 and 1997: risk-free interest rates of
6.02% and 6.55%; expected options life of 3 years and 4 years; and
volatility of 35% and 25% with no dividend yield in either year.
16
<PAGE>
D H MARKETING & CONSULTING, INC.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 9 - Commitments and Contingencies
Qualtronics Corporation, Inc., leases its facility under a lease that
expires on November 30, 2002. The lease provides that, in addition to the
monthly rent, the lessee pay 16.64% of the cost of real estate taxes, all
risk insurance, and common area charges. These costs will be considered as
additional rent. The Company will also pay the cost of utilities.
DHMC is committed to a lease for office space through January 31, 1999,
with monthly lease payments of $400.
UNI is committed to two spaces for office and warehouse facilities through
November 30, 1998 on the office and April 30, 1999 on the warehouse.
Monthly rent on these facilities total $5,596.
The total future minimum rental commitment at December 31, 1997, under
these leases is $538,032, which is due as follows:
Year Ending
December 31, Amount
____________ ___________
1998 $ 162,174
1999 102,368
2000 93,768
2001 93,768
2002 85,954
___________
$ 538,032
===========
Rent expense for the year ended December 31, 1997 is $97,121.
With the acquisition of UNI, the company received a sales tax liability
of approximately $319,000. These sales taxes are delinquent, and the sales
tax reports have yet to be filed. Additional penalties may be assessed by
the taxing authorities, for this delinquency. Any punitive action by the
taxing authorities have not been reflected in these financial statements.
NOTE 10 - Segment Data
For the year ended December 31, 1997 and 1996, the Company had four
reportable industry segments: (i) network marketing, (ii) collectibles,
(iii) chemical burn cleansing solutions, and (iv) acquisitions and
consulting.
Year Year
Ended Ended
December 31, December 31,
1997 1996
____________ ____________
Sales (Net of Discounts)
Multi-Level Network Marketing $ 483,000 $ 556,393
Collectibles 2,035,611 1,172,698
Burn Cleansing Solution 38,547 38,265
Mechanical Assemblies 2,503,684 -
____________ ____________
5,060,842 1,767,356
17
<PAGE>
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 10 - Segment Data (continued)
Year Year
Ended Ended
December 31, December 31,
1997 1996
_____________ _____________
Acquisitions and Consulting 448,200 250,000
Consolidated $ 5,509,042 $ 2,017,356
============ =============
Operating Income (Loss)
Multi-level Network Marketing $ 410,787 $ 501,039
Collectibles 719,591 613,598
Burn Cleansing Solution 19,290 12,124
Acquisitions and Consulting 448,200 252,825
Mechanical Assemblies 110,682 -
____________ ___________
Consolidated 1,708,550 1,379,586
Other Income 100,612 13,221
General Corporate Expenses (1,378,799) (474,093)
Interest Expense (45,784) (744)
____________ ___________
Net Income (Loss) Before Income Taxes $ 384,579 $ 917,970
============ ===========
Accounts and Other Receivables
Multi-Level Network Marketing $ 140,621 467,506
Collectibles 2,598 39,825
Burn Cleansing Solution - -
Acquisitions and Consulting - 100,000
Mechanical Assemblies 273,138 -
____________ __________
Consolidated 416,357 607,331
Corporate - 2,069
____________ __________
Total Accounts and Other Receivables $ 416,357 $ 609,400
============ ==========
Identifiable Assets
Multi-Level Network Marketing $ 3,954,607 $ 487,947
Collectibles 2,164,821 536,601
Burn Cleansing Solution - 2,871
Acquisitions and Consulting 48,903 466,720
Mechanical Assemblies 836,579 -
____________ __________
Consolidated 7,004,910 1,494,139
Corporate Assets 667,574 557,688
____________ __________
Total Assets at Period End $ 7,672,484 $2,051,827
============ ==========
-18-
<PAGE>
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 11 - Note Payable
Long Term Liabilities are detailed in the following schedules of
December 31, 1997 and 1996.
Note payable is detailed as follows: 1997 1996
________ ________
Note payable to a Bank, principle payments of
$2,976 plus interest through April 2003, bears
interest at 10.5%, secured by equipment and
inventory. $190,476 $ -
======== ========
During 1996, the ownership of the Company changed without prior
approval from the bank. This transaction resulted in the loan being in
default. As of February 13, 1998, the bank has made no demand for
repayment.
If no demand is made, future minimum principal payments on this note are as
follows:
Year Ending
December 31, Amount
____________ _____________
1998 $ 35,714
1999 35,714
2000 35,714
2001 35,714
2002 and thereafter 47,620
_____________
$ 190,476
=============
NOTE 12 - Obligations Under Capital Lease
Capital lease obligations are detailed in the following schedule as of
December 31, 1997 and 1996:
December 31, December 31,
1997 1996
____________ ____________
Capital lease obligation to a corporation
for equipment, lease payments due
monthly of $2,116 through March 2000,
bears interest at 10.5%, secured by equipment. $ 49,549 $ -
Capital lease obligation to a corporation
for copying equipment, lease payment due
monthly of $177 through September 1999,
bears interest at 20.58%, secured by
equipment. 2,975 -
-19-
<PAGE>
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 12 - Obligations Under Capital Lease (continued)
December 31, December 31,
1997 1996
____________ ____________
Capital lease obligation to a corporation
for equipment, lease payment due
monthly of $264 through March 2000,
bears interest at 10.5%, secured by equipment 6,333 -
Capital lease obligation to a corporation
for office equipment, lease payments due
monthly of $158 through February 2001,
bears interest at 12.7%, secured by office
equipment. 5,412 6,539
Capital lease obligation to a corporation
for a copier, lease payments due
monthly of $210 through March 2001, bears
interest at 17.6%, secured by copier equipment. 6,189 -
_____________ ____________
Total Lease Obligations 70,458 6,539
_____________ ____________
Less current portion 28,309 1,127
_____________ ____________
Net Long Term Lease Obligation $ 42,149 $ 5,412
============= =============
Future minimum lease payments are as follows:
1998 $ 35,100
1999 34,569
2000 11,556
2001 946
___________
82,171
Less portion representing
interest (11,713)
___________
Total $ 70,458
===========
Leased assets are as follows at December 31, 1997:
Leased Equipment 129,229
Accumulated Depreciation (48,610)
___________
Total Net Leased Equipment $ 80,619
===========
-20-
<PAGE>
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 13 - Retirement Plan (401K)
The Company sponsors a 401(k) deferred salary savings plan which is a
qualified defined contribution plan. All employees of the Company are
eligible to participate in the plan on January 1 and July 1 following their
completion of one year of service and attaining age 21. Pursuant to this
plan, employees can contribute up to 15% of their compensation to the plan.
The Company, at the discretion of the Board of Directors, can match the
employee's contributions up to 5% each year. The Company's Board of
Directors has the discretion to contribute up to a maximum of 20% of
employee compensation, which includes employee deferrals and Company
contributions.
NOTE 14 - Major Customers and Suppliers
During the years ended December 31, 1997 and 1996, QCI had the following
major customers from which the earned revenues were in excess of 10% of
total sales as follows:
Amount of Net Sales
Years Ended December 31,
________________________
Customer 1997 1996
____________ ___________ ___________
A 906,069 267,412
B 522,268 366,160
C 375,916 344,964
A part of the Company's business is dependent upon the availability of
burn cleansing solution available from a sole provider. At the present time,
the Company does not have a signed exclusive sales agreement with this
supplier. It is anticipated that an exclusive sales agreement will be signed
by the Company and the supplier in the near future. The Company has been
the only marketing agent for the supplier in the United States, for the
years ended December 31, 1997 and 1996, all purchases of burn cleansing
solution sold were from this supplier. At December 31, 1997 and 1996, there
was no payable due the supplier.
-21-
<PAGE>
D H Marketing & Consulting, Inc.
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 15 - Subsequent Events
On February 5, 1998, the Company signed an agreement to transfer all of its
interest in the stock of QCI to Runes, Corporation, a shareholder. In
consideration of the transfer, the Company is to receive $185,000 and
60,000 shares of D H Marketing common stock. Summary data of QCI at
December 31, 1997 is as follows:
Current Assets $ 520,555
Property & Equipment 294,226
Other Assets 21,798
Total Assets 836,578
Current Liabilities 180,230
Long Term Debt 213,618
Stockholders Equity 442,730
Total Liabities & Stockholders' Equity 836,578
Net Sales 2,504,095
Gross Profit 1,245,728
General and Administrative Expenses 1,118,806
Other Income (expenses) (29,178)
___________
Net Income $ 110,383
===========
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONSOLIDATED FINANCIAL REPORTS DATED DECEMBER 31, 1997 (AUDITED) AND
IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 706
<SECURITIES> 0
<RECEIVABLES> 279
<ALLOWANCES> 33
<INVENTORY> 5,559
<CURRENT-ASSETS> 6,977
<PP&E> 937
<DEPRECIATION> 422
<TOTAL-ASSETS> 7,673
<CURRENT-LIABILITIES> 841
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 6,784
<TOTAL-LIABILITY-AND-EQUITY> 7,673
<SALES> 4,959
<TOTAL-REVENUES> 4,959
<CGS> 2,628
<TOTAL-COSTS> 2,628
<OTHER-EXPENSES> 2,454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 385
<INCOME-TAX> 165
<INCOME-CONTINUING> 385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
</TABLE>
Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated February 13, 1998, in
this annual report on Form 10-KSB for D.H. Marketing & Consulting, Inc.
/s/ CROUCH, BIERWOLF & CHISHOLM
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
April 14, 1998
