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 June 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
- -----------------------------------------------------------------------------
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.)
- -----------------------------------------------------------------------------
300 Keystone Street, Hawley, PA 18428
(Address of principal executive offices)
- -----------------------------------------------------------------------------
(570) 226-8515
(Issuer's telephone number)
- -----------------------------------------------------------------------------
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 six months ended June 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
June 30, 1999 (unaudited)
and
December 31, 1998
<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 June 30, 1999 and the related
statements of operations, and cash flows for the six months ended June 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.
/s/ CROUCH, BIERWOLF & CHISHOLM
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
July 27, 1999
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Balance Sheets
ASSETS
------
June 30 December 31
1999 1998
------------ -----------
CURRENT ASSETS (unaudited)
Cash and Cash Equivalents $ 30,358 $ 308,838
Accounts receivable, Net of Allowance
1998 $0; 1999 $0 78,065 1,301
Other Receivables 4,622 4,634
Inventory 5,428,585 5,261,290
----------- ----------
Total Current Assets 5,541,630 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 (150,650) (129,631)
----------- ----------
Net Property & Equipment 474,175 458,778
----------- ----------
OTHER ASSETS
Organization Costs 71,429 71,429
Client Lists 10,000 10,000
----------- ----------
81,429 81,429
Less Accumulated Amortization (81,150) (79,096)
----------- ----------
279 2,333
Deferred Tax Assets - -
Deposits and Other Assets 6,450 6,450
Goodwill - -
----------- ----------
Net Other Assets 6,729 8,783
----------- ----------
TOTAL ASSETS $ 6,069,437 $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
------------------------------------
June 30 December 31
CURRENT LIABILITIES 1999 1998
------------- ------------
(unaudited)
Accounts payable $ 226,625 $ 90,682
Sales Tax Payable - 114,268
Accrued Wages 2,304 11,549
Accrued and Withheld Payroll Taxes 2,659 2,777
Deferred tax liability 5,974 5,974
Current Obligations Under Capital Lease 2,700 3,326
Current portion of Notes Payable 21,189 14,689
------------- -----------
Total Current Liabilities 261,451 243,265
------------- -----------
LONG-TERM DEBT
Mortgage payable 201,807 201,807
Obligation Under Capital Lease 4,105 5,476
------------- -----------
Total Long-Term Debt 205,912 207,283
------------- -----------
Total Liabilities 467,363 450,548
------------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 Par Value,
Authorized 75,000,000 Shares;
issued and outstanding 6,005,464 and
6,005,464 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 (3,317,552) (2,813,530)
------------- -----------
Total Stockholders' Equity 5,602,074 5,670,024
------------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,069,437 $ 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 six For the six
months ended months ended months ended months ended
June 30 June 30 June 30 June 30
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SALES $ 316,887 $ 384,282 $ 660,210 $ 1,334,621
COST OF GOODS SOLD 195,593 364,866 445,402
1,018,367
------------- ------------- ------------- -------------
GROSS PROFIT 121,294 19,416 196,452 316,254
------------- ------------- ------------- -------------
OPERATING EXPENSES
General And Administrative Expenses 361,059 585,870 705,472
996,553
------------- ------------- ------------- -------------
TOTAL OPERATING EXPENSES 361,059 585,870 705,472
996,553
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (239,765) (566,454) (509,021)
(680,299)
------------- ------------- ------------- -------------
OTHER INCOME AND (EXPENSES)
Interest Expense (140) - (387) -
Other Income 1,420 (816) 5,065 19,379
Gain on Sale of Investments - - 320 108,625
------------- ------------- ------------- -------------
Total Other Income and (Expenses) 1,280 (816) 4,998 128,004
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES (238,485) (567,270) (504,022)
(552,295)
------------- ------------- ------------- -------------
PROVISION FOR INCOME TAXES
Federal - 3,600 - -
State - - - 960
------------- ------------- ------------- -------------
Total Income Taxes - 3,600 - 960
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (238,485) $ (563,670) $ (504,022) $
(553,255)
============= ============= ==============
==============
NET INCOME (LOSS) PER SHARE $ (.03) $ (.094) $ (.06) $
(.092)
============= ============= ==============
==============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 8,419,964 6,005,464 8,419,964
6,005,464
============= ============= ==============
==============
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30 June 30
1999 1998
------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (504,022) $ (553,255)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation 21,019 2,427
Amortization 2,054 8,043
Receivables satisfied with return of treasury stock - (316,406)
Gain on Sale of Investments - (108,625)
Change in Assets and Liabilities (Net of
effects of sale of QCI)
(Increase) Decrease in:
Accounts Receivable (76,764) (37,251)
Other Receivables 12 115,032
Inventory (167,295) 374,994
Prepaid Expenses - 3,806
Deposits - (4,000)
Increase/(decrease) in:
Accounts Payable 135,943 (64,907)
Accrued Expenses (124,257) 1,610
------------- --------------
Net Cash Provided (Used) by
Operating Activities (713,310) (578,532)
------------- --------------
Cash Flows from Investing Activities
Purchase of short-term Investments - -
Purchase of Property and Equipment (6,415) -
Cash from sale of investments - 185,000
Cash acquired/(spun out) in subsidiaries - (174,641)
------------- --------------
Net Cash Provided (Used) by
Investing Activities (6,415) 10,359
------------- --------------
Cash Flows from Financing Activities
Proceeds from debt financing 6,500 50,000
Net Proceeds from Issuance of Common Stock - -
Principal payments on debt financing - -
Principal Payments on Capital Lease Obligations (1,327) (1,666)
Proceeds from stock subscriptions 436,072 -
------------- --------------
Net Cash Provided (Used) by
Financing Activities 441,245 48,334
------------- --------------
Net Increase (Decrease) in Cash and
Cash Equivalents (Forwarded) (278,480) (519,839)
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
<PAGE>
D H Marketing & Consulting, Inc.
Consolidated Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30 June 30
1999 1998
------------- --------------
<S> <C> <C>
Net Increase (Decrease) in Cash and
Cash Equivalents (Forwarded) (278,480) (519,839)
------------- --------------
Cash and Cash Equivalents
Beginning 308,838 706,609
------------- --------------
Ending $ 30,358 $ 186,770
============= ==============
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ 387 $ 2,689
============= ==============
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
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
-7-
<PAGE>
D H Marketing & Consulting, Inc.
December 31, 1998 and June 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 six
months ended June 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 third and fourth quarters
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 June 30, 1999, ending the second
quarter of 1999, shares were traded at the closing price of 7/16.
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, in 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 and healthcare & dietary supplements,
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. ("QCI"), a contract manufacturer of
electronic and electromechanical assemblies based in Allentown,
Pennsylvania.
The Company is also a 100% equity owner of Universal Network of
America, Inc. ("UNAI"), a direct sales organization distributing various
tangible asset collectibles and a new healthcare and dietary supplement
line 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 it believes will have a significant
impact on the sales figures for the third and fourth quarters 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 is expected to regain momentum
as Company representatives become more familiar with the marketing
plan. The Company is in the very 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 or sell any equipment. Further, there are no
present plans to significantly increase the number of employees
of the Company.
Selected Financial Data
for 3 mos for 3 mos for 6 mos for 6 mos
ended ended ended ended
6/30/99 6/30/98 6/30/99 6/30/98
Sales $ 316,887 $384,282 $660,210 $1,334,621
Cost of
Goods Sold 195,593 364,866 445,402 1,018,367
Net Income $(238,485) (567,270) (504,022) (553,255)
Net Income/
Share $ (.03) (.094) (.06) (.092)
Weighted Average
# Common Share 8,419,964 6,005,464 8,419,964 6,005,464
Liquidity
The Company posted a net loss of $238,485 for the second quarter of
1999. This represents a 57% reduction as compared to the loss during
the same period in 1998. The Company has reduced operating expenses
by 38% as compared to the second quarter of 1998.
The company has recorded Total Current Assets of $5,541,630 as of
June 30, 1999, of which $30,358 was held in cash or cash equivalents,
$82,687 was held in accounts receivable and the balance of $5,428,585
was held in inventory. Total Current Assets reflect little change as
compared to the second quarter of 1998, where the Total Current Assets
were $5,654,605.
Capital Resources
As of June 30, 1999, the Total Stockholder Equity was $5,602,074 as
compared with $5,400,313 on June 30, 1998.
Cash Expenditures
Total general and administrative expenses decreased from $585,870 on
June 30, 1998 to $361,059 on June 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
second 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 Capital Leases for Office Equipment that totaled
approximately $6,805 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, decreased from June 30, 1998 to
June 30, 1999 from $384,282 to $316,887. Management of the Company
points to the continued refocusing of sales into the skincare and dietary
supplement markets as the reason for the reduction in sales. As mentioned
earlier, an adjustment in the sales marketing plan also attributed to the
continued reduction in sales. Management anticipates that with the
stability of the new plan and the future potential of the compatible products,
there will be significant increases in the sales volume during the third
and fourth quarters of 1999.
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 4. Submission of Matters to a Vote of Security Holders
On June 22, 1999, the Company held its annual meeting of the
shareholders. There were 8,419,964 shares issued and outstanding
and eligible to vote. Following are the results of the votes for
the re-election to another term of the following directors:
For Against Abstain
----------- ------------ -----------
Ronald Meredith 4,384,789 6,729 66,513
Michael Daily 4,384,139 7,379 66,513
Steve Krakonchuk 4,380,789 10,729 66,513
William Bartley 4,384,789 6,729 66,513
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 June 30, 1999, the Company filed a Form
8-K on June 24, 1999 reporting an event on June 22, 1999 under
Item 5.
Items 2, 3 and 5 are not applicable and have been omitted.
<PAGE>
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
August 10, 1999 By: /s/ ROBERT N. ORSWELL
Date Robert N. Orswell
Chief Financial Officer
and duly authorized officer
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated July 27, 1999, in
this quarterly report on Form 10-QSB for D.H. Marketing & Consulting, Inc.
/s/ CROUCH, BIERWOLF & CHISHOLM
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
July 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS DATED JUNE 30, 1999 (UNAUDITED) AND DECEMBER
31, 1998 (AUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000933954
<NAME> D H MARKETING & CONSULTING INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 82
<ALLOWANCES> 0
<INVENTORY> 5,428
<CURRENT-ASSETS> 5,540
<PP&E> 624
<DEPRECIATION> 150
<TOTAL-ASSETS> 6,069
<CURRENT-LIABILITIES> 261
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 5,806
<TOTAL-LIABILITY-AND-EQUITY> 6,069
<SALES> 316
<TOTAL-REVENUES> 316
<CGS> 195
<TOTAL-COSTS> 195
<OTHER-EXPENSES> 359
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (238)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (238)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
