<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: March 31, 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 25,399,299 shares of common stock, par value $0.001, as of March
31, 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 consolidated balance sheet of the Company as of March 31,
2000, the related audited consolidated balance sheet of the Company as of
December 31, 1999; the related unaudited consolidated statements of operations
and cash flows for the three month periods ended March 31,2000 and 1999; and
the unaudited consolidated statement of stockholders' equity for the period
from December 31, 1997 through March 31, 2000 are attached here to and
incorporated herein by this reference.
Operating results for the three months period ended March 31, 1999 is 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)
Consolidated Balance Sheet
ASSETS
------
March 31, December 31,
2000 1999
------------ ------------
CURRENT ASSETS
Accounts receivable $ 27,320 $ -
Notes receivable - related parties (Note 6) 8,600 13,050
------------ ------------
Total Current Assets 35,920 13,050
------------ ------------
FIXED ASSETS - net (Notes 1 and 3) 30,935 16,287
------------ ------------
OTHER ASSETS
Deposits 12,957 10,126
Investment in marketable securities (Note 1) 541,671 315,128
Investment in property 95,000 95,000
------------ ------------
Total Other Assets 649,628 420,254
------------ ------------
TOTAL ASSETS $ 716,483 $ 449,591
============ ============
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 4
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
March 31, December 31,
2000 1999
------------ ------------
CURRENT LIABILITIES
Cash overdraft $ 22,349 $ 16,149
Accounts payable 97,562 115,432
Accrued expenses (Note 4) 309,821 345,210
Current portion - long-term liabilities (Note 5) 371,048 351,319
Convertible debentures (Note 5) 157,045 174,967
Notes payable - related parties (Note 5) 285,368 87,735
------------ ------------
Total Current Liabilities 1,243,193 1,090,812
------------ ------------
LONG-TERM LIABILITIES (Note 5) - -
------------ ------------
Total Liabilities 1,243,193 1,090,812
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7) 377,180 368,982
------------ ------------
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; 25,199,299 and 22,569,135
shares issued and outstanding, respectively 25,199 22,569
Additional paid-in capital 5,765,515 5,433,887
Other comprehensive gain (loss) 41,671 (184,872)
Accumulated deficit (6,736,275) (6,281,787)
------------ ------------
Total Stockholders' Equity (Deficit) (903,890) (1,010,203)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 716,483 $ 449,591
============ ============
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 5
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Statements of Operations
For the
Three Months Ended
March 31,
---------------------------
2000 1999
------------ ------------
REVENUES
Agency contract revenue - related party $ - $ 146,224
Other operating revenue 60,408 15,322
------------ ------------
Total Revenues 60,408 161,546
COST OF SALES 19,846 181,956
------------ ------------
GROSS MARGIN 40,562 (20,410)
------------ ------------
EXPENSES
Salaries and wages 164,167 74,479
Depreciation and amortization 2,510 4,153
General and administrative 282,593 395,738
------------ ------------
Total Expenses 449,270 474,370
------------ ------------
Loss from Operations (408,708) (494,780)
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (45,780) (30,972)
------------ ------------
Total Other Income (Expense) (45,780) (30,972)
------------ ------------
NET (LOSS) (454,488) (525,752)
------------ ------------
OTHER COMPREHENSIVE GAIN
Gain (loss) on valuation of marketable
securities 226,543 -
------------ ------------
Total Other Comprehensive Gain 226,543 -
------------ ------------
NET COMPREHENSIVE (LOSS) $ (227,945) $ (525,752)
============ ============
BASIC (LOSS) PER SHARE $ (0.02) $ (0.03)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 23,723,639 18,273,636
============ ============
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 6
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Total
Additional Other Stockholders'
Common Stock Paid-in Comprehensive Stock Accumulated Equity
Shares Amount Capital Income Subscription Deficit (Deficit)
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <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 notes to the consolidated financial statements.
<PAGE>
<PAGE> 7
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Total
Additional Other Stockholders'
Common Stock Paid-in Comprehensive Accumulated Equity
Shares Amount Capital Income Deficit (Deficit)
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <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 $0.125 per share 1,716,099 1,716 212,796 - - 214,512
Common stock issued for debt
at $0.131 per share 914,065 914 118,832 - - 119,746
Gain on valuation at marketable
securities - - - 226,543 - 226,543
Net loss for the period ended
March 31, 2000 - - - - (454,488)
(454,488)
----------- ----------- ----------- ----------- ----------- ----------
Balance, March 31, 2000 25,199,299 $ 25,199 $ 5,765,515 $ 41,671 $(6,736,275) $ (903,890)
=========== =========== =========== =========== =========== ==========
</TABLE>
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 8
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Statements of Cash Flows
For the
Three Months Ended
March 31,
---------------------------
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (454,488) $ (525,752)
Adjustments to reconcile net loss to net cash
flows used by operating activities:
Depreciation and amortization 2,511 4,152
Common stock issued for services 214,512 480,115
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (27,320) 89,318
(Increase) decrease in accounts receivable -
related party 4,450 424
(Increase) decrease in deposits (2,831) (2,600)
Increase (decrease) in cash overdraft 6,200 (6,014)
Increase (decrease) in commitments and
contingencies 8,198 -
Increase (decrease) in accounts payable (17,870) 45,777
Increase (decrease) in accrued expenses (45,403) (89,038)
Increase (decrease) in deferred revenue - (127,000)
------------ ------------
Net Cash Flows (Used) by
Operating Activities (312,041) (130,618)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property - (95,000)
Purchase of fixed assets (17,159) (600)
------------ ------------
Net Cash Flows (Used) by
Investing Activities (17,159) (95,600)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable and
convertible debentures (17,922) -
Proceeds from notes payable and
convertible debentures 347,122 235,104
------------ ------------
Net Cash Flows Provided by
Financing Activities $ 329,200 $ 235,104
------------ ------------
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 9
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Consolidated Statements of Cash Flows (Continued)
For the
Three Months Ended
March 31,
---------------------------
2000 1999
------------ ------------
NET INCREASE (DECREASE) IN CASH $ - $ 8,886
CASH AT BEGINNING OF PERIOD - -
------------ ------------
CASH AT END OF PERIOD $ - $ 8,886
============ ============
CASH PAID DURING THE YEAR FOR:
Interest $ 45 $ 107
Income taxes $ - $ -
NON-CASH TRANSACTIONS
Debentures converted to common stock $ 17,922 $ 113,035
Interest converted to common stock $ 18,274 $ -
Common stock issued for accounts payable $ 83,550 $ -
Common stock issued for notes payable $ - $ 85,119
Common stock issued for services $ 214,512 $ 479,625
Common stock issued for property $ - $ 95,000
See the accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 10
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated 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 its subsidiary merged with DISX
being the surviving entity.
b. Accounting Method
The Company's consolidated 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 Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Basic Loss Per Share (Continued)
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
March 31, 2000 March 31, 1999
----------------------------------- -----------------------------------
Loss Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Loss $ (454,488) 23,723,639 $ (0.02) $ (525,752) 18,273,636 $ (0.03)
</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
March 31, 2000. The Company has net operating loss carryforwards of
approximately $6,000,000 which will expire in 2008 through 2019. 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 Consolidated Financial Statements
March 31, 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.
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 classifies the
shares as available for sale. Accordingly, the increase in value of $41,671
from the date the shares were received to March 31, 2000 is reflected as a
separate component of stockholders' equity.
<PAGE>
<PAGE> 13
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 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:
March 31, December 31,
2000 1999
------------ ------------
Computer equipment $ 43,301 $ 26,142
Office equipment 41,286 41,286
Capital lease equipment 8,795 8,795
------------ ------------
93,382 76,223
Accumulated depreciation (62,447) (59,936)
------------ ------------
$ 30,935 $ 16,287
============ ============
Total depreciation expense for the three months ended March 31, 2000 and the
year ended December 31, 1999 was $2,511 and $4,153, respectively.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
March 31, December 31,
2000 1999
------------ ------------
Accrued salaries and wages $ 27,752 $ 46,214
Federal payroll taxes payable 151,828 140,795
State withholding and unemployment taxes payable 16,139 -
Property tax payable 986 -
Other accrued payable 18,357 -
Accrued interest payable 94,759 86,001
Consulting fees payable - 72,200
------------ ------------
$ 309,821 $ 345,210
<PAGE>
<PAGE> 14
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 5 - LONG-TERM LIABILITIES
Long-term liabilities consisted of the following:
March 31, December 31,
2000 1999
------------ ------------
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. $ 285,368 $ 87,735
------------ ------------
Total Notes Payable - Related Parties 285,368 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 $0.00 per share. Interest and principal
due on demand. 45,045 45,045
------------ ------------
Total Convertible Debentures $ 157,045 $ 174,967
------------ ------------
<PAGE>
<PAGE> 15
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 5 - LONG-TERM LIABILITIES (Continued)
March 31, December 31,
2000 1999
------------ ------------
Current Portion Long-Term Liabilities
- -------------------------------------
Notes payable to five individuals, secured by
Company stock, at 12% per annum payable
on demand. $ 151,824 $ 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. 1,026 1,297
------------ ------------
Total Current Portion Long-Term Liabilities 371,048 351,319
------------ ------------
Total long-term liabilities 813,461 614,021
Less current portion long-term liabilities (371,048) (351,319)
Less convertible debentures (157,045) (174,967)
Less notes payable - related parties (285,368) (87,735)
------------ ------------
Long-term liabilities $ - $ -
============ ============
<PAGE>
<PAGE> 16
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 5 - LONG-TERM LIABILITIES (Continued)
March 31, December 31,
2000 1999
------------ ------------
Principal maturities are as follows:
2000 $ 813,461 $ 614,021
2001 - -
2002 - -
2003 - -
2004 - -
2005 and thereafter - -
------------ ------------
$ 813,461 $ 614,021
============ ============
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 March 31, 2000, the balance due is $8,600 including principal
and interest.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Pending Litigation
- ------------------
The Company is involved in litigation with Laservend, Inc., a Utah corporation
("Laservend"), who 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 with the agreement
or understanding that the company would repay Laservend $225,000 plus
interest. Subsequently, the complaint has been amended alleging that the
amounts advanced with interest are $273,000. The Company contends 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 the 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 the Company, 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 has granted the Trustee's Motion
for Summary Judgment. The Order grants judgment in the amount of $273,347
principle, together with prejudgment interest of $66,884, plus prejudgment
interest estimated at $28,751 in accordance with 29 U.S.C. section 1961. The
Company has accrued $377,180. The trustee garnished amounts claimed due from
topjobs.net inc, the JV, and the bank account of the Company. The Trustee has
also executed liens on the computer equipment, stock in topjobs.net inc and
topjobs.net plc, and other assets of the Company. 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
<PAGE>
<PAGE> 17
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
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.
Management intends to make payment of the judgment. The Company has also
deposited the topjobs.net plc stock with the court against the liability.
Operating Lease Obligation
- --------------------------
The Company is leasing its office space on a month-to-month basis. Rent
expense for the three months ended March 31, 2000 and 1999 was $6,487 and
$17,746, 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, 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.
[Note the deletion of the remaining Note 8 text.]
<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 first quarter of 2000, the Company began its transition from its
relationship with topjobs.net inc. During this period, 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 first quarters of those years
may have limited significance.
Three month period ended March 31, 2000 compared to the three month period
ended March 31, 1999
- --------------------------------------------------------------------------
Total revenues for the quarter ended March 31, 2000 was $60,408 compared to
$161,546 for the same period of 1999. This decrease was due to the operating
change from advertising agency revenues from topjobs.net inc during 1999 to
Internet recruiting activities in 2000. Direct costs for the three months
ended March 31, 2000 were $19,846 as compared to $181,956 for three months
ended March 31, 1999. The significant reduction in direct costs were
primarily due to the absence of advertising related costs necessary support of
topjobs.net inc's 1999 employment database activities.
For the first quarter of fiscal year 2000, operating expenses were $449,270,
consisting of salaries and wages of $164,167, depreciation and amortization
expenses of $2,510, and general and administrative expenses of $282,593,
resulting in a loss from operations of $408,708. Total operating expenses for
the same period of 1999 were $474,370, consisting of salaries and wages of
$74,479, depreciation and amortization expenses of $4,153, and general and
administrative expenses of $395,738, resulting in a loss from operations of
$494,780. The increase in salaries and wages resulted from the return of key
personnel from topjobs.net inc to DiSX to run the Company's Internet
recruitment activities. The reduction in general and administrative expenses
was due to lower expenses for professional services.
Total other income (expense) for the first three months of 2000 netted an
expense of $(45,780) compared to an expense of $(30,972) for the first three
months of 1999. Other (expense) for the periods was comprised solely of
interest expense. The increase from the 1999 period to the 2000 period was
due to increases in provisions for interest on contingent liabilities.
<PAGE>
<PAGE> 19
The net loss for the Company was $(454,488) in the first quarter of 2000
compared to $(525,752) for the same period of the prior year. The Company
experienced a comprehensive loss $(227,945) for the three months ended March
31, 2000 compared to a comprehensive loss of $(525,752) for the same period of
1999, a reduction in the loss of 56.6% from the prior year total. The basic
loss per share for the first quarter 2000 was $0.02 as compared to $0.03 for
the first quarter 1999, based on the weighted average number of shares
outstanding for the respective periods.
Liquidity and Capital Resources
- -------------------------------
During the first quarter 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 $(1,207,273), at March 31, 2000.
The Company had a cash overdraft of $27,320 and receivables of $35,920. Cash
used in operations for the quarter ended March 31, 2000 was $312,041 compared
with $130,618 for the quarter ended March 31, 1999. Cash flows used in
investing activities decreased to $17,159 in the first quarter 2000 compared
with 95,600 in the same period prior year. The decrease was due to the
absence of a property purchase in 2000. Proceeds from notes payable and
convertible debentures offset the funding used in operations and investing
activities and cash payments for payments on prior notes payable and
convertible debentures. In addition, $17,922 of the notes payable and
convertible debentures were repaid through conversion to common stock in
during the first quarter of 2000.
Because the Company has an accumulated deficit of $(6,736,175), 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 March 31, 2000, the Company had recorded $309,821 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
pay the Utah Department of Job Force Services $2,000 monthly towards the
Company's unemployment tax obligation.
During the quarter, the Company issued 2,630,164 shares of its restricted
common stock. Of that total, 619,500 shares were issued for services
rendered, 649,999 shares were issued to affiliates for services rendered,
549,000 shares were issued to employees for services rendered and incentive
during the move from the joint venture to the Company, 241,665 shares were
issued to reduce convertible debentures and related accrued interest payable,
and 570,000 shares were issued to the consultant for first quarter activities.
<PAGE>
<PAGE> 20
At March 31, 2000, the Company had recorded notes payable, convertible
debentures, and current portion of long-term liabilities totaling $813,461
compared with $614,421 at December 31,1999. The company anticipates
converting more that $300,000 of the March 31 total to equity through issuance
of restricted shares of the Company's common stock during the 2nd quarter
2000.
The Company has recorded contingent liabilities, including a provision for
accrued interest, totaling $377,180. These contingent liabilities relate
primarily to Laservend, Inc. In January 1997, 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
Company filed an answer to the complaint. 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.
As of December 31, 2000, the Company paid the Bankruptcy Court $7,125. 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 writes of garnishment or executions or otherwise collect on the
judgment. The Company also accrued additional interest and other contingent
expenses through March 31, 2000 bringing the total contingent liability on the
Laservend and Martineau matters to $377,180. During the first quarter of
2000, $17,468 has been sent to reduce the outstanding balance. As of the end
of April, 2000, the Company's holding in PLC stock may be sold to help repay
the judgment.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation with Laservend, Inc., a Utah corporation
("Laservend"), who 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 has been amended alleging that the
amounts advanced with interest are $273,000.00. The Company contends that the
parties were in merger negotiations and that the amounts advanced were part of
these negotiations. Further, that in the event
<PAGE>
<PAGE> 21
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 has
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 has 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. Management intends to make payment of the
judgment. As of the end of April, 2000, the Company's holding in PLC stock
may be sold to help repay the judgment.
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
In January, the Company issued restricted common stock to the following
affiliates: Larry D. Heaps was issued 100,000 shares of restricted common
stock for services rendered; Curtis T. Johnson was issued 399,999 shares of
restricted common stock for services rendered; and Troy L. Corriveau was
issued 150,000 shares of restricted common stock for services rendered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
<PAGE> 22
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: May 18, 2000 /S/LARRY D. HEAPS
-----------------------------------
President and Director
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
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