U. S. Securities and Exchange Commission
Washington, D.C., 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________
Commission file number 000-22729
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D.H. MARKETING & CONSULTING, INC.
(Exact name of small business issuer as specified in its charter)
- -----------------------------------------------------------------------------
Nevada
(State or other jurisdiction of incorporation or organization)
88-0330263
(IRS Employer Identification No.)
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300 Keystone Street, Hawley, PA 18428
(Address of principal executive offices)
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(570) 226-8515
(Issuer's telephone number)
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Former area code (717)
(Former name, former address and former fiscal year, if changed since last
report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of August 4, 1999 the
issuer had 8,419,964 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one);
Yes [ ] No [X]
<PAGE>
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated financial statements presented herein have been
prepared by the Company in accordance with the instructions to Form 10-QSB
and do not include all of the information and note disclosures required by
generally accepted accounting principles. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the period ended December 31, 1998 included in the
Company's Form 10-KSB for the period ended December 31, 1998. The accompanying
financial statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the opinion of
management such financial statements include all adjustments necessary to
present fairly the Company's financial position and results of operations. The
results of operations for the nine months ended September 30, 1999 may not be
indicative of the results that may be expected for the year ending
December 31, 1999.
<PAGE>
D H Marketing & Consulting, Inc.
And Subsidiaries
Consolidated Financial Statements
September 30, 1999
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
D H Marketing and Consulting, Inc.
Hawley, Pennsylvania
The accompanying balance sheets as of September 30, 1999 and the
related statements of operations and cash flows for the nine
months ended September 30, 1999 and 1998 were not audited by us
and, accordingly, we do not express an opinion on them.
The accompanying balance sheet as of December 31, 1998 was
audited by us and we expressed an unqualified opinion on it in
our report dated February 12, 1999.
November 1, 1999
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Balance Sheets
ASSETS
September 30 December 31
1999 1998
-------------- ------------
CURRENT ASSETS (unaudited)
Cash and Cash Equivalents $ 28,617 $ 308,838
Accounts receivable, Net of Allowance
1998 $0; 1999 $0 303,046 1,301
Other Receivables 4,534 4,634
Inventory 5,196,237 5,261,290
-------------- ------------
Total Current Assets 5,532,434 5,576,063
-------------- ------------
INVESTMENTS
Investments - Other 46,903 46,948
-------------- ------------
Total Investments 46,903 46,948
-------------- ------------
PROPERTY & EQUIPMENT
Office Furniture and Fixtures 20,185 20,184
Equipment 188,976 182,561
Leasehold Improvements 17,668 17,668
Building 200,000 200,000
Land 197,996 197,996
Accumulated Depreciation (171,669) (129,631)
-------------- ------------
Net Property & Equipment 453,156 458,778
-------------- ------------
OTHER ASSETS
Organization Costs 71,429 71,429
Client Lists 10,000 10,000
-------------- -------------
81,429 81,429
Less Accumulated Amortization (81,429) (79,096)
-------------- ------------
- 2,333
Deferred Tax Assets - -
Deposits and Other Assets 6,450 6,450
Goodwill - -
-------------- ------------
Net Other Assets 6,450 8,783
-------------- -------------
TOTAL ASSETS $ 6,038,943 $ 6,120,572
============== =============
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 December 31
CURRENT LIABILITIES 1999 1998
------------- -----------
(unaudited)
Accounts payable $ 78,005 $ 90,682
Sales Tax Payable - 114,268
Accrued Wages - 11,549
Accrued and Withheld Payroll Taxes 7,924 2,777
Deferred tax liability 5,974 5,974
Current Obligations Under Capital Lease 2,700 3,326
Current portion of Notes Payable 29,900 14,689
------------ -----------
Total Current Liabilities 124,503 243,265
------------ -----------
LONG-TERM DEBT
Mortgage payable 216,496 201,807
Obligation Under Capital Lease 3,191 5,476
------------ -----------
Total Long-Term Debt 219,687 207,283
------------ -----------
Total Liabilities 344,190 450,548
------------ -----------
STOCKHOLDERS' EQUITY
Common stock, $.0003 Par Value, Authorized 75,000,000
Shares; issued and outstanding 8,419,964 and
8,419,964 shares, respectively 2,526 2,526
Additional Paid-In Capital 9,995,794 9,995,794
Treasury Stock (814,766) (814,766)
Stock subscription receivable (263,928) (700,000)
Retained earnings (3,224,873) (2,813,530)
------------ -----------
Total Stockholders' Equity 5,694,753 5,670,024
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,038,943 $ 6,120,572
============ ===========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30 September 30 September 30 September 30
1999 1998 1999 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
SALES $ 320,723 $ 104,547 $ 961,897 $ 1,439,168
COST OF GOODS SOLD 89,683 104,571 535,085 1,122,938
------------ ------------ ------------ -----------
GROSS PROFIT 231,040 (24) 426,812 316,230
------------ ------------ ------------ -----------
OPERATING EXPENSES
General And Administrative
Expenses 137,637 2,416,465 843,109 3,413,018
------------ ------------ ------------ -----------
TOTAL OPERATING EXPENSES 137,637 2,416,465 843,109 3,413,018
------------ ------------ ------------ -----------
OPERATING INCOME (LOSS) 93,403 (2,416,489) (416,297) (3,096,788)
------------ ------------ ------------ -----------
OTHER INCOME AND (EXPENSES)
Interest Expense (395) - (782) -
Other Income 352 661 5,417 20,040
Gain on Sale of Investments - - 320 108,625
------------ ------------ ----------- -----------
Total Other Income and
(Expenses) (43) 661 4,955 128,665
------------ ------------ ------------ -----------
INCOME BEFORE INCOME TAXES 93,360 (2,415,828) (411,342) (2,968,123)
------------ ------------ ------------ -----------
PROVISION FOR INCOME TAXES
Federal - (18,347) - (18,347)
State - - - 960
------------ ------------ ------------ -----------
Total Income Taxes - (18,347) - (17,387)
------------ ------------ ------------ -----------
NET INCOME (LOSS) $ 93,360 $ (2,397,481) $ (411,342) $(2,950,736)
============ ============ ============ ===========
NET INCOME (LOSS) PER SHARE $ .011 $ (.359) $ (.049) $ (.474)
============ ============ ============ ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 8,419,964 6,671,714 8,419,964 6,227,547
============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
For the nine For the nine
months ended months ended
September 30 September 30
1999 1998
------------ ------------
Cash Flows From Operating Activities
Net income (loss) $ (411,342) $ (2,950,736)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation 42,037 3,641
Amortization 4,108 12,064
Receivables satisfied with return of
treasury stock - (316,406)
Gain on Sale of Investments - (108,625)
Stock issued for Bonuses and Services - 1,861,125
Change in Assets and Liabilities
(Net of effects of sale of QCI)
(Increase) Decrease in:
Accounts Receivable (301,745) (34,842)
Other Receivables 100 271,138
Inventory 65,053 334,844
Prepaid Expenses - 3,806
Deposits - (520)
Increase/(decrease) in:
Accounts Payable (12,677) (89,818)
Accrued Expenses (123,520) (2,038)
Accrued Income Taxes - 5,740
------------ ------------
Net Cash Provided (Used) by Operating
Activities (737,986) (1,010,627)
------------ ------------
Cash Flows from Investing Activities
Purchase of short-term Investments - -
Purchase of Property and Equipment (6,415) (6,283)
Cash from sale of investments - 185,000
Cash acquired/(spun out) in subsidiaries - (174,641)
------------ ------------
Net Cash Provided (Used) by Investing
Activities (6,415) 4,076
------------ ------------
Cash Flows from Financing Activities
Proceeds from debt financing 29,900 50,000
Net Proceeds from Issuance of Common Stock - 492,500
Net Proceeds from Issuance of Preferred Stock - 517,750
Principal payments on debt financing - (50,000)
Principal Payments on Capital Lease Obligations (1,592) (2,651)
Proceeds from stock subscriptions 436,072 -
------------ ------------
Net Cash Provided (Used) by Financing
Activities 464,180 1,007,599
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents (Forwarded) (280,221) 1,048
------------ ------------
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
(Continued)
For the nine For the nine
months ended months ended
September 30 September 30
1999 1998
------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents (Forwarded) (280,221) 1,048
------------ ------------
Cash and Cash Equivalents
Beginning 308,838 706,609
------------ ------------
Ending $ 28,617 $ 707,657
============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash payments for interest $ 782 $ 2,919
============ ============
Cash payments for income taxes $ - $ 7,525
============ ============
Supplemental Schedule of Noncash Investing
and Financing Activities
Purchase of Inventory through Issuance of
Company Stock $ - $ -
============ ============
Satisfaction of Receivables through return of
Treasury Stock $ - $ 316,406
============ ============
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
D H MARKETING & Consulting, Inc.
September 30, 1999
NOTES TO FINANCIAL STATEMENTS
D H Marketing & Consulting, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the nine
months ended September 30, 1999, since there have been no material
changes (other than indicated in other footnotes) to the information
previously reported by the Company in their Annual Report filed on Form
10-KSB for the Fiscal year ended December 31, 1998.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to
properly reflect the results of the period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
This Form 10-QSB includes, without limitation, certain statements
containing the words "believes", "anticipates", "estimates", "expects" and
words of a similar nature, which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
This Act provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward looking and provide meaningful,
cautionary statements identifying important factors that could cause actual
results to differ from the projected results. All statements other than
statements of historical fact made in this Form 10-QSB are forward-looking. In
particular, the statements herein regarding the new marketing plan's impact on
sales for the upcoming fourth quarter and beyond, the impact that management's
familiarity with the marketing plan will have on sales figures in the future,
future plans regarding the purchase or sale of significant equipment, future
plans regarding the increase or decrease in the number of employees, and year
2000 issues are forward-looking statements. Forward-looking statements reflect
management's current expectations and are inherently uncertain. The Company's
actual results may differ significantly from management's
expectations.
Overview
On February 25, 1997, the Company undertook a three for one forward split of
its common stock and, as a result of the stock split, is now traded under the
symbol "DHMG." At the close of business September 30, 1999, ending the third
quarter of 1999, shares were traded at the closing price of $3/8.
The Company, in the past, was segmented into four distinct operations,
consisting of the Network Marketing Division, the Collectible Division, the
Burn Cleansing Solution Division and the Acquisitions & Consulting Division.
The Company has, since the first quarter of 1998, divested itself of all
business activities that do not relate to the Company's primary business, the
sale of tangible asset collectibles, especially as to how that business focus
relates to the Company's wholly owned subsidiary Universal Network of America,
Inc. and that company's operating subsidiary Universal Network, Inc.
In the early part of the second quarter of 1997, the Company reopened its
regional office in Vancouver, British Columbia. The Company closed its West
Coast Relations Office in Las Vegas, Nevada in December, 1997 and relocated
the headquarters from Milford, Pennsylvania to Hawley, Pennsylvania
on February 1, 1998.
The Company was, until February 5, 1998, a 97% equity owner of Qualtronics
Corporation, Inc., a contract manufacturer of electronic and electromechanical
assemblies based in Allentown, Pennsylvania.
The Company is a 100% equity owner of Universal Network of America, Inc.
("UNAI"), a direct sales organization distributing various tangible asset
collectibles through Independent Distributors. UNAI is based in Sarasota,
Florida and operates through its subsidiary Universal Network, Inc.
The Company has developed a marketing plan through Universal Network of
America, Inc. which has impacted the third quarter sales figures and the
company believes will have a significant impact on the sales figures for the
fourth quarter of 1999 and beyond. The changeover of this plan during the
second quarter of 1999 caused a small reduction in sales figures from the
anticipated numbers but has regained momentum as company representatives have
become more familiar with the marketing plan. The Company is continuing the
early stages of research and development on a series of products that will
complement the Unitropin Formula Plus. There are no present plans to purchase
any significant equipment nor sell any equipment. There are no present plans
to significantly increase the number of employees of the Company.
In April of 1999, the Company formulated a strategy for its LongerLiving.com
Internet health portal. The site was launched to the public in mid-June of
1999. LongerLiving.com provides high-quality, accurate, health-related content
that is targeted toward the average consumer, with initial emphasis on the
issues of individuals in the "baby boomer" demographic group. By providing
reliable, sought-after information, LongerLiving.com expects to create a
significant community of loyal members. Revenues are expected to be generated
through sales of advertising space, out-licensing of the site's original
content, partnership arrangements, and sales of goods through the site's e-
commerce section. LongerLiving.com has retained key personnel to continue and
expand development of the site and continues to build its database of
qualified contributors as well as its medical advisory board.
Selected Financial Data
for 3 mos for 3 mos for 9 mos for 9 mos
ending ending ending ending
9/30/99 9/30/98 9/30/99 9/30/98
Sales $ 320,723 $104,547 $961,897 $1,439,168
Cost of
Goods Sold 89,683 104,571 535,085 1,122,938
Net Income $ 93,360 (2,397,481) (411,342) (2,950,736)
Net Income/
Share $ .011 (.359) (.049) (.474)
Weighted Average
# Common Share 8,419,964 6,671,714 8,419,964 6,227,547
Liquidity
The Company posted a net gain of $93,360 for the third quarter of 1999. This
first quarter showing a net gain over the past 6 quarters. The Company has
reduced operating expenses by 94% as compared to the third quarter of 1998.
The company has recorded Total Current Assets of $5,532,434 as of September
30, 1999, of which $28,617 was held in cash or cash equivalents, $307,580 was
held in accounts receivable and the balance of $5,196,237 was held in
inventory. Total Current Assets reflect a 6% reduction as compared to the
third quarter of 1998, where the Total Current Assets were $6,057,127.
Capital Resources
As of September 30, 1999, the Total Stockholder Equity was $5,694,753 as
compared with $5,874,208 on September 30, 1998.This represents a 3% reduction
in equity as compared with the third quarter of 1998.
Cash Expenditures
Total general and administrative expenses decreased from $2,416,465 on
September 30, 1998 to $137,637 on September 30, 1999. The company has been
making a determined effort to reduce expenditures in order to have cash flow
availability for its research and development. This is the third quarter in a
row that the Company has reduced expenses by 30% or more as compared to the
same period in 1998.
Long-Term Debt/Current Liabilities
The Company has satisfactorily retired all Long-Term Debt with the exception
of two(2) Capital Leases for Office Equipment that totaled approximately
$5,891 in current and long-term debt. In January 1999, the Company purchased
the property location in Sarasota, Florida. This property was being leased by
Universal Network of America, Inc. The current 30 year mortgage is valued at
$201,807.
Revenue
Total revenue, less sales discounts, increased from September 30, 1998 to
September 30, 1999 from $104,547 to $320,723. Management of the Company
points to the continued refocusing of sales into the skincare and dietary
supplement markets as the reason for the increase in sales. Management
anticipates that with the stability of the new plan and the future potential
of the compatible products, the major sales increase in the third quarter is a
small reflection of the anticipated increases in the sales during the fourth
quarter and beyond.
Universal Network, Inc. introduced two new product lines in the past year. The
first was a consumable line of health and beauty products for both men and
women. The "Universal Collection" contains 24k gold flakes within aloe vera
based products. The second product line was introduced late in the fourth
quarter of 1998. It is an all natural dietary supplement called hGH Unitropin
Formula Plus. The company is presently involved with research and development
on additional products in this second product line.
Year 2000
The Company has reviewed its ability to convert when the year 2000
arrives. The Company has recently upgraded its server as well as upgraded some
of the hardware. Further, the Company is in the process of obtaining a
brand-new software package that will be year 2000 compliant. The Company
purchased this package several months ago and the installation has been
included in the purchase price. Once this package is installed, the entire
network of operations should be year 2000 compliant. Management of the Company
does not anticipate that any additional expenses will be incurred once the
year 2000 is here, as the Company should be prepared for the transition.
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The United States Securities and Exchange Commission is conducting a formal
investigation of the Company, with which the Company's management is
cooperating. The outcome of such investigation is not known at this time. 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with or
incorporated by reference in this report.
Exhibit No. Description and Method of Filing
- ----------- ----------------------------------------------
23 Consent of Accountant
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1999, the Company filed a Form
8-K on September 17, 1999 reporting events on August 25, 1999 and September
15, 1999 under Item 5.
Items 2, 3 4 and 5 are not applicable and have been omitted.
SIGNATURES
In Accordance to the requirements of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
D.H. Marketing & Consulting, Inc.
A Nevada Corporation
November 15, 1999 By: /s/ MICHAEL J. DAILY
Date Michael J. Daily
President
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated November 1, 1999, in
this quarterly report on Form 10-QSB for D.H. Marketing & Consulting, Inc.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
November 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS DATED SEPTEMBER 30, 1999 (UNAUDITED) AND
DECEMBER 31, 1998 (AUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 29
<SECURITIES> 0
<RECEIVABLES> 307
<ALLOWANCES> 0
<INVENTORY> 5,196
<CURRENT-ASSETS> 5,532
<PP&E> 625
<DEPRECIATION> 172
<TOTAL-ASSETS> 6,032
<CURRENT-LIABILITIES> 124
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,914
<TOTAL-LIABILITY-AND-EQUITY> 6,038
<SALES> 962
<TOTAL-REVENUES> 962
<CGS> 535
<TOTAL-COSTS> 535
<OTHER-EXPENSES> 843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (411)
<INCOME-TAX> 0
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<NET-INCOME> (411)
<EPS-BASIC> (.049)
<EPS-DILUTED> (.049)
</TABLE>
