<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number: 33-94318-C
DYNAMIC INFORMATION SYSTEM & EXCHANGE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
UTAH 87-0508350
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
385 EAST 800 SOUTH, OREM, UTAH 84004
----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(801) 426-4600
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, was 28,253,299 shares of common stock, par value $0.001, as of June 30,
2000.
<PAGE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, stockholders' equity and cash
flows in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of June 30, 2000, the
related audited balance sheet of the Company as of December 31, 1999; the
related unaudited statements of operations and cash flows for the six month
periods ended June 30,2000 and 1999; and the unaudited statements of
stockholders' equity for the period from December 31, 1997 through June 30,
2000 are attached here to and incorporated herein by this reference.
Operating results for the six months period ended June 30, 2000 are not
necessarily indicative of the results that can be expected for the Company's
fiscal year ending December 31, 2000.
<PAGE>
<PAGE> 3
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Balance Sheets
ASSETS
------
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT ASSETS
Accounts receivable $ 30,028 $ -
Notes receivable - related parties (Note 6) 9,000 13,050
------------ ------------
Total Current Assets 39,028 13,050
------------ ------------
FIXED ASSETS - net (Notes 1 and 3) 31,011 16,287
------------ ------------
OTHER ASSETS
Deposits 10,126 10,126
Investment in marketable securities (Note 1) - 315,128
Investment in property 95,000 95,000
------------ ------------
Total Other Assets 105,126 420,254
TOTAL ASSETS $ 175,165 $ 449,591
============ ============
See the accompanying footnotes to the unaudited financial statements.
<PAGE> 4
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 4,427 $ 16,149
Accounts payable 119,126 115,432
Accrued expenses (Note 4) 365,789 345,210
Current portion - long-term liabilities (Note 5) 416,860 351,319
Convertible debentures (Note 5) 157,045 174,967
Notes payable - related parties (Note 5) 225,524 87,735
------------ ------------
Total Current Liabilities 1,288,771 1,090,812
------------ ------------
LONG-TERM LIABILITIES (Note 5) - -
------------ ------------
Total Liabilities 1,288,771 1,090,812
COMMITMENTS AND CONTINGENCIES (Note 7) 142,832 368,982
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 5,000,000 shares authorized at
$0.001 par value; no shares issued or outstanding - -
Common stock; 50,000,000 shares authorized at
$0.001 par value; 28,253,299 and 22,569,135
shares issued and outstanding, respectively 28,353 22,569
Additional paid-in capital 6,275,936 5,433,887
Other comprehensive gain (loss) - (184,872)
Accumulated deficit (7,560,727) (6,281,787)
------------ ------------
Total Stockholders' Equity (Deficit) (1,256,438) (1,010,203)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 175,165 $ 449,591
============ ============
See the accompanying footnotes to the unaudited financial statements.
<PAGE>
<PAGE> 5
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Agency contract revenue
- related party $ - $ 802,164 $ - $ 645,618
Other operating revenue 120,636 34,566 60,228 27,227
------------ ------------ ------------ ------------
Total Revenues 120,636 836,730 60,228 672,845
COST OF SALES 39,313 839,068 19,467 654,773
------------ ------------ ------------ ------------
GROSS MARGIN 81,323 (2,338) 40,761 18,072
------------ ------------ ------------ ------------
EXPENSES
Salaries and wages 298,393 152,113 134,226 84,290
Depreciation and amortization 6,816 7,796 4,306 3,643
General and administrative 720,819 497,675 438,226 78,142
------------ ------------ ------------ ------------
Total Expenses 1,026,028 657,584 576,758 166,075
------------ ------------ ------------ ------------
Loss from Operations (944,705) (659,922) (535,997) (148,003)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on sale of securities (279,000) - (279,000) -
Interest income - 600 - 300
Other expense - (10,158) - (3,572)
Interest expense (55,235) (62,396) (9,455) (26,424)
Loss on equity investment - (250,795) - (250,795)
------------ ------------ ------------ ------------
Total Other Income (Expense) (334,235) (322,749) (288,455) (280,491)
------------ ------------ ------------ ------------
NET (LOSS) (1,278,940) (982,671) (824,452) (428,494)
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE GAIN (LOSS)
Gain (loss) on valuation of
marketable securities 184,872 (263,019) (41,671) (263,019)
------------ ------------ ------------ ------------
Total Other Comprehensive Gain 184,872 (263,019) (41,671) (263,019)
------------ ------------ ------------ ------------
NET COMPREHENSIVE (LOSS) $ (1,094,068) $ (1,245,690) $ (866,123) $ (691,531)
============ ============ ============ ============
BASIC (LOSS) PER SHARE $ (0.05) $ (0.05) $ (0.04) $ (0.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 25,192,393 18,643,974 25,192,393 19,673,784
============ ============ ============ ============
</TABLE
See the accompanying footnotes to the unaudited financial statements.
<PAGE>
<PAGE> 6
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Statements of Stockholders' Equity (Deficit)
</TABLE>
<TABLE>
<CAPTION>
Total
Additional Other Stockholders'
Common Stock Paid-in Comprehensive Accumulated Equity
Shares Amount Capital Loss Deficit (Deficit)
---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997 12,922,848 $ 12,921 $3,286,813 $ - $(4,554,021) $(1,254,287)
Common stock issued for services
rendered at $0.30 per share 385,500 386 116,438 - - 116,824
Conversion of debentures and
interest payable to common
stock at $0.24 per share 2,562,813 2,563 618,350 - - 620,913
Conversion of notes and interest
payable at $0.21 per share 875,608 877 179,411 - - 180,288
Net loss for the year ended
December 31, 1998 - - - - (1,373,142) (1,373,142)
---------- ---------- ---------- ------------ ------------ ------------
Balance, December 31, 1998 16,746,769 16,747 4,201,012 - (5,927,163) (1,709,404)
Common stock issued for services
$0.23 per share 2,737,378 2,737 751,819 - - 754,556
Conversion of debentures and
payable to common stock at $0.25
per share 2,006,503 2,007 501,270 - - 503,277
Conversion of notes and interest
payable to common stock at $0.27
per share 1,033,985 1,034 278,830 - - 279,864
Cancellation of common stock (295,500) (296) (393,704) - - (394,000)
Common stock issued for property
at $0.22 per share 340,000 340 94,660 - - 95,000
Loss on valuation of marketable
securities - - - (184,872) - (184,872)
Net loss for the year ended
December 31, 1999 - - - - (354,624) (354,624)
---------- ---------- ---------- ------------ ------------ ------------
Balance, December 31, 1999 22,569,135 $ 22,569 $5,433,887 $ (184,872) $(6,281,787) $(1,010,203)
---------- ---------- ---------- ------------ ------------ ------------
</TABLE>
See the accompanying footnotes to the unaudited financial statements.
<PAGE> 7
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Total
Additional Other Stockholders'
Common Stock Paid-in Comprehensive Accumulated Equity
Shares Amount Capital Loss Deficit (Deficit)
---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 22,569,135 $ 22,569 $5,433,887 $ (184,872) $(6,281,787) $(1,010,203)
Common stock issued for
services at $0.18 per
share (unaudited) 2,986,099 2,986 529,726 - - 532,712
Common stock issued for
debt at $0.11 per
share (unaudited) 2,798,065 2,798 312,323 - - 315,121
Gain on valuation at marketable
securities (unaudited) - - - 184,872 - 184,872
Net loss for the six months ended
June 30, 2000 (unaudited) - - - - (1,278,940) (1,278,940)
---------- ---------- ---------- ------------ ------------ ------------
Balance, June 30, 2000
(unaudited) 28,253,299 $ 28,353 $6,275,936 $ - $(7,560,727) $(1,256,438)
========== ========== ========== ============ ============ ============
</TABLE>
See the accompanying footnotes to the unaudited financial statements.
<PAGE>
<PAGE> 8
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,278,940) $ (982,671) $ (824,452) $ (428,494)
Adjustments to reconcile net loss to net
cash flows used by operating activities:
Depreciation and amortization 6,816 7,796 4,305 3,643
Common stock issued for services 532,712 342,274 318,200 -
Disposition of marketable securities 279,000 - 279,000 -
Loss on equity investment - 250,305 - 250,305
Changes in operating assets and liabilities
(Increase) decrease in accounts
receivable (30,028) (49,371) (2,708) (150,018)
(Increase) decrease in accounts
receivable - related party 4,050 (10,566) (400) 8,029
(Increase) decrease in deposits - - 2,831 -
(Increase) decrease in prepaids and
other assets - (10,496) - (7,896)
Increase (decrease) in cash
overdraft (11,722) (1,651) (17,922) 4,363
Increase (decrease) in commitments and
contingencies (226,150) - (234,348) -
Increase (decrease) in
accounts payable 3,694 176,201 21,564 130,914
Increase (decrease) in
accrued expenses 20,579 (39,363) 55,968 (21,902)
Increase (decrease) in
deferred revenue - 873,000 - -
------------ ------------ ------------ ------------
Net Cash Flows (Used)
by Operating Activities (699,989) 555,458 (397,962) (211,056)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable securities - (500,000) - -
Payments to equity investee - (250,305) - -
Purchase of fixed assets (21,540) (1,200) (4,381) (600)
Proceeds from sale of securities 221,000 - 221,000 -
------------ ------------ ------------ ------------
Net Cash Flows (Used)
by Investing Activities 199,460 (751,505) 216,619 (600)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable and
convertible debentures (17,922) (622,038) - (97,230)
Proceeds from notes payable and
convertible debentures 518,451 818,085 181,343 300,000
------------ ------------ ------------ ------------
Net Cash Flows Provided by
Financing Activities $ 500,529 $ 196,047 $ 181,343 $ 202,770
------------ ------------ ------------ ------------
</TABLE>
See the accompanying footnotes to the unaudited financial statements.
<PAGE>
<PAGE> 9
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $ - $ - $ - $ (8,886)
CASH AT BEGINNING OF PERIOD - - - 8,886
------------ ------------ ------------ ------------
CASH AT END OF PERIOD $ - $ - $ - $ -
============ ============ ============ ============
CASH PAID DURING THE YEAR FOR:
Interest $ 45 $ 32,867 $ - $ 14,587
Income taxes $ - $ - $ - $ -
NON-CASH TRANSACTIONS
Debentures converted to
common stock $ 17,922 $ 190,971 $ - $ 182,145
Interest converted to
common stock $ 33,321 $ 35,035 $ 15,047 $ 35,035
Common stock issued for
notes payable $ 300,074 $ 257,124 $ 216,524 $ 257,124
Common stock issued for
accrued wages $ - $ 119,312 $ - $ 76,950
Common stock issued for property $ - $ 95,000 $ - $ -
Common stock issued for services $ 532,712 $ 342,274 $ 318,200 $ -
</TABLE>
See the accompanying footnotes to the unaudited financial statements.
<PAGE>
<PAGE> 10
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The financial statements presented are those of Dynamic Information System &
eXchange, Inc. (DiSX) (the Company). The Company was incorporated in the
State of Utah on March 20, 1987.
Effective October 20, 1994, the Company and DiSX completed an Agreement and
Plan of Reorganization whereby the Company issued 14,483,326 (3,620,838 post-
split shares) shares of its common stock in exchange for 100% of the issued
and outstanding common stock of DiSX. The Company also changed its name on
this date from M&K Investments, Inc. to Dynamic Information System & eXchange,
Inc. On October 31, 1994, the Company effected a reverse stock split of the
outstanding common shares at a rate of 1 share for every 2 shares outstanding.
During 1995 the shareholders approved an additional reverse stock split at a
rate of 1 share for every 2 shares outstanding. All references to shares
outstanding and earnings per share have been retroactively restated to reflect
the reverse stock splits.
DiSX was incorporated in the State of Utah on April 9, 1993. DiSX was founded
to provide information services to the labor and employment industry and has
developed a data base that includes over 60,000 professional job listings
throughout the United States. 85% of the listings are currently contained in
the Western United States. DiSX products include TopJobs USA and
UltimateResume.com.
At the time of the acquisition, the Company was essentially inactive, with no
operations and minimal assets. Additionally, the exchange of the Company's
common stock for the common stock of DiSX resulted in the former stockholders
of DiSX obtaining control of the Company. Accordingly, DiSX became the
continuing entity for accounting purposes, and the transaction was accounted
for as a recapitalization of DiSX with no adjustment to the basis or assets
acquired or liabilities assumed by the Company. For legal purposes, the
Company was the surviving entity. The Company was taken out of the
development stage on January 1, 1999.
Effective September 30, 1999, the Company and it's subsidiary merged with DISX
being the surviving entity.
b. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has selected a calendar year end.
c. Basic Loss Per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements as follows:
<PAGE>
<PAGE> 11
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Basic Loss Per Share (Continued)
<TABLE>
<CAPTION>
For the Six Months Ended For the Six Months Ended
June 30, 2000 June 30, 1999
----------------------------------- -----------------------------------
Loss Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------ --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
$(1,278,940) 25,192,393 $(0.05) $ (982,671) 18,643,974 $(0.05)
For the Three Months Ended For the Three Months Ended
June 30, 2000 June 30, 1999
----------------------------------- -----------------------------------
Loss Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------ --------- ----------- ------------- ---------
$ (824,452) 25,192,393 $(0.04) $ (428,494) 19,673,384 $ (0.02)
</TABLE>
Fully diluted loss per share is not presented as any common stock equivalents
are antidilutive in nature.
d. Provision for Taxes
No provision for taxes has been made, due to cumulative operating losses at
June 30, 2000. The Company has net operating loss carryforwards of
approximately $4,317,000 which will expire in 2008 through 2020. The net
operating losses are the only significant component of the deferred tax asset
and liability. No tax benefit has been reported in the financial statements
and the potential tax benefits of the loss carryforwards are offset by a
valuation allowance of the same amount.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
f. Fixed Assets
Fixed assets are stated at cost. Depreciation of fixed assets is computed
using the straight-line method over the estimated useful lives of the related
assets, primarily five years.
g. Concentrations of Credit Risk
The Company sells its services in Utah and various other states. The Company
extends credit to its customers.
Credit losses, if any, have been provided for in the financial statements and
are based on management's expectations. The Company's accounts receivable are
subject to potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual risks, nor significant risks in the
normal course of its business.
<PAGE>
<PAGE> 12
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
i. Revenue Recognition
The Company recognized media revenues upon completion of services.
j. Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred. Advertising expense was $455 and $47,535 for the six months
ended June 30, 2000 and 1999, respectively.
k. Changes in Accounting Principles
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting changes
in fair value or cash flows. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The adoption of this
statement had no material impact on the Company's financial statements.
l. Marketable Securities
The Company has adopted the provisions of SFAS No. 115, "Accounting for
Investments in Debt and Equity Securities." In 1999, the Company received
41,667 shares of topjobs.net, plc which were valued at their trading price of
$12 per share for a total valuation of $500,000. The Company classified the
shares as available for sale. The securities were sold for $221,000 with a
realized loss of $279,000 being recognized in the six months ended June 30,
2000. (See Note 7).
m. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the adjustments
which, in the opinion of management, are necessary for a fair presentation.
Such adjustments are of a normal recurring nature.
<PAGE>
<PAGE> 13
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues sufficient
to cover its operating costs and to allow it to continue as a going concern.
It is the intent of the Company to generate cash flow through increased sales
and marketing of its internet services and to continue to convert debt to
equity.
NOTE 3 - FIXED ASSETS
Fixed assets consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Computer equipment $ 47,682 $ 26,142
Office equipment 41,286 41,286
Capital lease equipment 8,795 8,795
------------ ------------
97,763 76,223
Accumulated depreciation (66,752) (59,936)
------------ ------------
$ 31,011 $ 16,287
============ ============
</TABLE>
Total depreciation expense for the six months ended June 30, 2000 and 1999 was
$6,816 and $7,796, respectively.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Accrued salaries and wages $ 26,060 $ 46,214
Payroll and federal withholding
taxes payable 184,096 140,795
State withholding and unemployment
tax payable 24,937 -
Property tax payable 986 -
Other accrued payable 18,358 -
Accrued interest payable 112,159 86,001
Consulting fees payable - 72,200
------------ ------------
$ 366,596 $ 345,210
============ ============
</TABLE>
<PAGE>
<PAGE> 14
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 5 - LONG-TERM LIABILITIES
Long-term liabilities consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Notes Payable - Related Parties
Note payable to a family organization related
to an officer, secured by Company stock, at
12% per annum, payable on demand. $ 225,524 $ 87,735
------------ ------------
Total Notes Payable - Related Parties 225,524 87,735
------------ ------------
Convertible Debentures
1996 convertible debentures payable to three
individuals bearing interest at 10% per annum,
convertible into Company stock at $0.50 per
share. Interest and principle due on demand. 30,000 30,422
1997 convertible debentures payable to three
individuals bearing interest at 10% per annum,
convertible into Company stock at an average
price of $0.375 per share. Interest and principal
due on demand. 2,000 17,500
1998 convertible debentures payable to three
individuals bearing interest at 12% per annum,
convertible into Company stock at $0.25 per
share. Interest and principal due on demand. 80,000 82,000
1999 convertible debentures payable to four
individuals bearing interest at 12% per annum,
convertible into Company stock at an average
price of $0.25 per share. Interest and principal
due on demand. 45,045 45,045
------------ ------------
Total Convertible Debentures $ 157,045 $ 174,967
------------ ------------
</TABLE>
<PAGE>
<PAGE> 15
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 5 -LONG-TERM LIABILITIES (Continued)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current Portion Long-Term Liabilities
-------------------------------------
Notes payable to five individuals, secured by
Company stock, at 12% per annum payable
on demand. $ 197,824 $ 151,824
Note payable to Company, secured by
Company stock, at 12% per annum, payable
by demand. 100,000 100,000
Note payable to individual at 10% per annum,
secured by Company, due upon demand. 50,000 50,000
Note payable to an individual at 30% per
annum, secured by Company stock, due
upon demand. 9,000 9,000
Note payable to an individual at 12% per
annum, unsecured, due on demand. 20,000 -
Note payable to Utah State University at 6%
per annum, unsecured, with an initial payment
of $9,000 due June 30, 1996 and thereafter monthly
principal and interest payments of $2,852. 39,198 39,198
Overdraft payable to bank at 21%, unsecured,
with an overdraft limit of $7,500, payable on
demand. 838 1,297
------------ ------------
Total Current Portion Long-Term Liabilities 416,860 351,319
------------ ------------
Total long-term liabilities 799,429 614,021
Less current portion long-term liabilities (416,860) (351,319)
Less convertible debentures (157,045) (174,967)
Less notes payable - related parties (225,524) (87,735)
------------ ------------
Long-term liabilities $ - $ -
============ ============
Principal maturities are as follows:
2000 $ 799,429 $ 614,021
2001 - -
2002 - -
2003 - -
2004 - -
2005 and thereafter - -
------------ ------------
$ 799,429 $ 614,021
============ ============
</TABLE>
<PAGE>
<PAGE> 16
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 6 - NOTES RECEIVABLE - RELATED PARTIES
During the year ended December 31, 1999, the Company advanced $18,750 to four
employees. The notes receivable bear interest at 8%, are unsecured and due on
demand. As of June 30, 2000, the balance due is $9,000 including principal and
interest.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Pending Litigation
The Company was involved in litigation with Laservend, Inc., a Utah
corporation ("Laservend"), which is currently undergoing Chapter 7 bankruptcy
proceedings in the Bankruptcy Court for the District of Utah, Central
Division. Laservend's Bankruptcy Trustee filed a complaint against the
Company on June 18, 1998, alleging that Laservend had advanced the Company
$225,000.00 with the agreement or understanding that the Company would repay
Laservend $225,000.00 plus interest. Subsequently, the complaint was amended
alleging that the amounts advanced with interest are $273,000.00. The Company
contended that the parties were in merger negotiations and that the amounts
advanced were part of these negotiations. Further, that in the event that a
merger did not occur, any and all amounts advanced by Laservend to the Company
would be repaid through the Company's Common Stock at a rate of $0.50 per
share. The merger failed to take place due to events occurring in Laservend.
On July 31, 1998, the Trustee in bankruptcy filed a Complaint that the advance
is a loan to be repaid by DiSX, that it was a preferential transfer and that
Laservend did not receive reasonably equivalent value for the advances. An
Answer was filed by the Company. The Bankruptcy Court granted the Trustee's
Motion for Summary Judgment. The Order grants judgment in the amount of
$273,347.00 principle, together with prejudgment interest of $66,884.25, plus
prejudgment interest in accordance with 29 U.S.C. Section 1961. The Trustee
garnished amounts claimed due from topjobs.net inc, the JV, and the bank
account of DiSX. The Trustee also executed on the computer equipment, office
equipment, stock in topjobs.net inc and topjobs.net plc, and other assets of
DiSX. The Company has entered into a Settlement Agreement with the Trustee.
Under the terms of the Settlement Agreement, the Company is obligated to make
certain payments to the Trustee and during such time the Trustee agrees to
forbear from obtaining writs of garnishment or executions or otherwise
collecting on the judgment except for the collection of the two garnishments
described above. During such period of forbearance, the writs of execution
remain in effect. As of June 30, 2000, the Company's holding in PLC stock was
be sold to help repay the judgment, and $221,000 was credited toward the total
judgment. Management intends to make payment of the balance of $142,832,
shown in the financial statements at June 30, 2000 as a contingent liability.
<PAGE>
<PAGE> 17
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Operating Lease Obligation
The Company is leasing its office space on a month-to-month basis. Rent
expense for the six months ended June 30, 2000 and 1999 was $31,966 and
$35,492, respectively.
Consulting Agreement
On October 21, 1999, the Company entered into a consulting agreement for the
purpose of advising corporate management and assisting on business and growth
strategies. The agreement calls for the Company to issue 500,000 shares of
restricted common stock upon signing and to issue 190,000 shares of restricted
common stock per month for the next ten months.
NOTE 8 - OTHER INCOME
In June 1998, the Company entered into a nine month research and cooperation
test marketing agreement, limited to the State of Utah and the city of
Houston, Texas with topjobs.net plc (PLC), a corporation located in
Manchester, England. partially as a result of securing contracts which
provided net revenues to the venture of $141,000 in December 1998, the Company
and PLC decided to terminate the test marketing arrangement and establish a
permanent joint venture in the United States. PLC formed a Delaware
corporation, known as topjobs.net inc. (joint venture). On February 11, 1999,
the Company entered into a series of agreements with PLC, including a
Stockholders' Agreement and Licensing Agreement. As an incentive for the
Company to take a minority interest (49%) in the joint venture, PLC advanced
$300,000 to the Company in interest free loans through March 4, 1999. Upon
PLC's initial public offering, PLC paid the Company an additional $200,000,
forgave the $300,000 of loans and issued to the Company 41,667 shares of PLC's
ordinary shares valued at the then market price of $12 per share for total
consideration of $1,000,000.
<PAGE>
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-looking Statements
---------------------------------------------------------
This report may contain "forward-looking" statements. The Company is
including this cautionary statement for the express purpose of availing itself
of the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include, but are not
limited to: (a) projections of revenues, capital expenditures, growth,
prospects, dividends, capital structure and other financial matters; (b)
statements of plans and objectives of the Company or its management or Board
of Directors; (c) statements of future economic performance; (d) statements of
assumptions underlying other statements and statements about the Company and
its business relating to the future; and (e) any statements using the words
"anticipate," "expect," "may," "project," "intend" or similar expressions.
Results of Operations
---------------------
During the second quarter of 2000, the Company continued its transition from
its relationship with topjobs.net inc. During the first quarter of 2000, the
Company discontinued activities as an advertising agent for topjobs.net inc
and returned to Internet employment recruiting operations. Because of the
significant change in operating activities and revenues from 1999 to 2000,
comparisons of the financial statements for the two quarters of those years
may have limited significance.
Three month period and six month period ended June 30, 2000 compared to the
three month period and six month period ended June 30, 1999
---------------------------------------------------------------------------
Total revenues for the three month period and the six month period ended June
30, 2000 were $60,228 and $120,636, respectively, compared to $672,945 and
$836,730 for the same periods of 1999. This year to year decrease was due to
the operating change from agency revenues from topjobs.net inc during 1999 to
Internet recruiting activities in 2000. Direct costs for the three months and
six months ended June 30, 2000 were $19,467 and $39,313, respectively, as
compared to $654,773 for three months ended June 30, 1999 and $839,068 for the
six months ended June 30, 1999. The significant reduction in direct costs was
primarily due to the absence of advertising related costs necessary support of
topjobs.net inc's employment database activities.
For the second quarter of fiscal year 2000, operating expenses were $576,758,
consisting of salaries and wages of $134,226, depreciation and amortization
expenses of $4,306, and general and administrative expenses of $438,226,
resulting in a loss from operations of $535,997. Total operating expenses for
the second quarter of 1999 were $166,075, consisting of salaries and wages of
$84,290, depreciation and amortization expenses of $3,643, and general and
administrative expenses of $78,142, resulting in a loss from operations of
$148,003. For the first six months of fiscal year 2000, operating expenses
were $1,026,028, consisting of salaries and wages of $298,393, depreciation
and amortization expenses of $6,816, and general and administrative expenses
of $720,819, resulting in a loss from operations of $944,705. Total operating
expenses for the first six months of 1999 were $657,584, consisting of
salaries and wages of $152,113, depreciation and amortization expenses of
$7,796, and general and administrative expenses of $497,675, resulting in a
loss from operations of $659,922. The increase in salaries and wages resulted
from the return of key personnel from topjobs.net inc to run the Company's
Internet recruitment activities. The increase in general and administrative
expenses was due to higher expenses for professional services, related to
public relations and business promotions provided by outside parties. See
Note 7 for the financial statements.
<PAGE>
<PAGE> 19
Total other expense for the three month period and the six month period ended
June 30, 2000 netted expenses of $288,455 and $334,235 for the respective
periods, compared to expenses of $280,491 and $322,749 for the same periods
of 1999. Other expense for the fiscal year 2000 periods was comprised of loss
on the sale of securities and interest expense. Other expense for fiscal year
1999 periods was comprised of a loss on an equity investment in topjobs.net
inc and interest expense. The increase from 1999 to 2000 was due to higher
losses on the year 2000 disposal of securities versus 1999's loss on the
equity investment. Interest expense in half of 2000 was lower than the same
periods in 1999.
The net loss for the Company was $824,452 in the second quarter of 2000
compared to $428,494 for the same period of the prior year. The net loss for
the first six months of 2000 was $1,278,940 compared to $982,671 in the first
six months of 1999. The Company experienced a comprehensive loss of $866,123
for the three months ended June 30, 2000 compared to a comprehensive loss of
$691,531 for the same period of 1999, an increase in the loss by 25.2% from
the prior year total. The comprehensive loss was $1,094,068 for the six
months ended June 30, 2000 compared to $1,245,690 for the same period of 1999.
The basic loss per share for the second quarter 2000 was $0.04 as compared to
$0.02 for the second quarter 1999, based on the weighted average number of
shares outstanding for the respective periods. The basic loss per share was
$0.05 during the first half of 2000, unchanged from the 1999 first half loss
per share.
Liquidity and Capital Resources
-------------------------------
During the first two quarters of 2000, cash flows from operations, notes
payable (some convertible to shares of the Company's common stock) and the
issuance shares of the Company's restricted common stock were utilized for
working capital, conversion of debt, payment of professional services and for
other activities of the Company.
The Company had a working capital deficit of $1,249,743, at June 30, 2000.
The Company had a cash overdraft of $4,427 and receivables of $39,028. Cash
used in operating activities was $397,962 for the quarter ended June 30, 2000
and $699,989 for the six months ended June 30, 2000. In 1999, cash used in
operating activities was $211,056 during the first quarter while $555,458 cash
was derived from operating activities during the first half of that fiscal
year. Net cash flows proceeding from investing activities were to $216,619 in
the first quarter 2000 and $199,460 in the first half of 2000. In 1999, cash
used by investing activities was $600 in the first quarter and $751,505 in the
first half of the year. The year to year change in the six month totals
resulted primarily from $221,000 in proceeds from the disposal of securities
in 2000 compared with funds used relative to topjobs.net inc activities in the
prior year. During the three months and six months ending one June 30, 2000,
the Company received from financing activities $181,343 and $500,529,
respectively. In 1999, the Company received $202,770 from financing
activities during the second quarter and $196,047 during the first half of the
year.
Because the Company has an accumulated deficit of $7,560,727, has a working
capital deficit and limited internal financial resources, the report of the
Company's auditor contains a going concern modification as to the ability of
the Company to continue. In fiscal year 2000, the Company continues measures
to reduce cash outflow and increase working capital through proceeds from
operations and the conversion of accrued liabilities and notes payable to
common stock. The Company will rely on additional outside debt and equity
funding as it continues its transition from advertising agency activities to
Internet employment operations. The Company is currently negotiating with an
outside party to provide the equity capital projected to be necessary to take
the Company to a break-even status, then on to profitability. At this time,
however, no definitive agreement for such equity capital has been reached.
<PAGE>
<PAGE> 20
At June 30, 2000, the Company had recorded $366,596 in accrued expenses
consisting of accrued salaries and wages, accrued interest and unpaid payroll
taxes, and unemployment taxes, including reasonable interest and penalties for
late payment. At December 31, 1999, accrued expenses totaled $345,210. The
Company has also paid a portion of the accrued payroll taxes due to the
Internal Revenue Service and the Utah State Tax Commission and continues to
make monthly payments to Utah Department of Workforce Services toward the
Company's unemployment tax obligation.
At June 30, 2000, the Company had recorded notes payable, convertible
debentures, and current portion of long-term liabilities totaling $799,429
compared with $614,421 at December 31,1999. The Company hopes to convert
more than $300,000 of the June 30, 2000 total to equity through issuance of
restricted shares of the Company's common stock during the course of fiscal
year 2000, but does not have any definitive commitments for such conversion at
this time.
The Company has recorded contingent liabilities, including a provision for
accrued interest, totaling $142,832. These contingent liabilities relate
primarily to LaserVend, Inc. In January 1998, the Company entered into a
"Letter Offer to Acquire" with LaserVend, Inc. whereby LaserVend would acquire
all the issued and outstanding common stock of the Company. In anticipation
of the proposed merger, LaserVend advanced the Company $286,572 during the
year ended December 31, 1999. The merger failed to take place due to events
occurring in LaserVend. LaserVend subsequently filed for bankruptcy. On July
31, 1998, the Trustee in bankruptcy filed a complaint that the advance was a
loan to be repaid by DiSX, that it was a preferential transfer and that
Laservend did not receive reasonably equivalent value for the advances. The
Bankruptcy Court granted the Trustee's motion for summary judgment. The order
granted judgment in the amount of $273,347 principle, together with
prejudgment interest of $66,884. The Company accrued additional interest and
other contingent expenses, bringing the total contingent liability to
$377,180. During the second quarter of 2000, Trustee took possession of the
Company's holding in PLC, and credited $221,000 toward the judgment, reducing
the liability to the $142,832 shown as a contingent liability at June 30,
2000. See Note 7 to the financial statements and Part II, Item 1, Legal
Proceedings.
Impact of Inflation
-------------------
The Company does not anticipate that inflation will have a material impact on
its current or proposed operations.
Seasonality
-----------
The Company does not anticipate that seasonality will have a material impact
on its current or proposed operations.
<PAGE>
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was involved in litigation with Laservend, Inc., a Utah
corporation ("Laservend"), which is currently undergoing Chapter 7 bankruptcy
proceedings in the Bankruptcy Court for the District of Utah, Central
Division. Laservend's Bankruptcy Trustee filed a complaint against the
Company on June 18, 1998, alleging that Laservend had advanced the Company
$225,000.00 with the agreement or understanding that the Company would repay
Laservend $225,000.00 plus interest. Subsequently, the complaint was amended
alleging that the amounts advanced with interest are $273,000.00. The Company
contended that the parties were in merger negotiations and that the amounts
advanced were part of these negotiations. Further, that in the event that a
merger did not occur, any and all amounts advanced by Laservend to the Company
would be repaid through the Company's Common Stock at a rate of $0.50 per
share. The merger failed to take place due to events occurring in Laservend.
On July 31, 1998, the Trustee in bankruptcy filed a Complaint that the advance
is a loan to be repaid by DiSX, that it was a preferential transfer and that
Laservend did not receive reasonably equivalent value for the advances. An
Answer was filed by the Company. The Bankruptcy Court granted the Trustee's
Motion for Summary Judgment. The Order grants judgment in the amount of
$273,347.00 principle, together with prejudgment interest of $66,884.25, plus
prejudgment interest in accordance with 29 U.S.C. Section 1961. The Trustee
garnished amounts claimed due from topjobs.net inc, the JV, and the bank
account of DiSX. The Trustee also executed on the computer equipment, office
equipment, stock in topjobs.net inc and topjobs.net plc, and other assets of
DiSX. The Company has entered into a Settlement Agreement with the Trustee.
Under the terms of the Settlement Agreement, the Company is obligated to make
certain payments to the Trustee and during such time the Trustee agrees to
forbear from obtaining writs of garnishment or executions or otherwise
collecting on the judgment except for the collection of the two garnishments
described above. During such period of forbearance, the writs of execution
remain in effect. As of June 30, 2000, the Company's holding in PLC stock was
be sold to help repay the judgment, and $221,000 was credited toward the total
judgment. Management intends to make payment of the balance of $142,832,
shown in the financial statements at June 30, 2000 as a contingent liability.
In March 2000, the Company was sued in the matter of Martineau & Company vs.
Dynamic Information System & eXchange, Inc. The Company has filed an Answer.
The amount claimed in the Complaint is in excess of $21,666.00. The amount
claimed for accounting services is apparently $8,648.00 with the balance being
accrued interest at 2% per month since March 1995. Company management does
not believe that accounting services were provided by plaintiff and intends to
contest the matter rigorously. Due to the recent involvement with the matter
no evaluation can be made of the likelihood of an unfavorable outcome nor the
range of potential loss.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
<PAGE> 22
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
------- -----------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYNAMIC INFORMATION SYSTEM & EXCHANGE, INC.
[Registrant]
Dated: August 18, 2000 /S/LARRY D. HEAPS
----------------------
President and Director
