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: 0-24138
DIAMOND EQUITIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Nevada 88-0232816
- ------------------------------ ----------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
216 South Alma School Road, Suite 10, Mesa, Az 85210
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(Address of Principal Executive Offices)
(480) 462-5900
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and formal 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 and, (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
As of March 31, 2000, Diamond Equities, Inc. Registrant had 8,180,099 shares of
its $0.001 par value common stock outstanding.
Page 1 of 11 sequentially numbered pages
FORM 10-Q
THIRD QUARTER 2000
Diamond Equities, Inc.
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Balance Sheets - March 31, 2000 and June 30, 1999 .............. 3 - 4
Statements of Operations for the Three and Nine Months
Ended March 31, 2000 and 1999 .................................. 5
Statement of Cash Flows - for the Nine Months
Ended March 31, 2000 and 1999 .................................. 6 - 7
Notes to Financial Statements .................................. 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................... 9
PART II. OTHER INFORMATION
Item 3(b) Defaults Upon Senior Securities ..................... 10
Page 2
DIAMOND EQUITIES, INC.
Balance Sheets
ASSETS
March 31, June 30,
2000 1999
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 224,228 $ 210,035
Certificates of Deposit -- --
Receivables
Trade accounts, net of allowance for doubtful
accounts of $13,606 at March 31, 2000 and
June 30, 1999 80,093 199,338
Interest Receivable -- 15,939
Inventory 79,677 184,143
Prepaid expenses 4,929 37,744
Note Receivable-current portion -- 274,535
---------- ----------
Total Current Assets 388,927 1,126,734
---------- ----------
PROPERTY AND EQUIPMENT 655,785 1,535,717
---------- ----------
OTHER ASSETS
Notes Receivable-noncurrent portion 364,898 224,388
Other assets 105,201 147,963
---------- ----------
Total Other Assets 470,099 372,351
---------- ----------
$1,514,811 $3,034,802
========== ==========
See accompanying notes to financial statements.
3
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
2000 1999
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 107,019 $ 330,329
Accrued expenses 22,401 62,409
Customers deposits -- 8,809
Line of Credit -- --
Current Portion Long Term Debt 6,000 165,007
Capital lease obligation - current portion -- 33,435
Accrued preferred dividends 194,023 196,774
----------- -----------
Total Current Liabilities 329,443 796,763
----------- -----------
LONG-TERM LIABILITIES
Captial Lease obligations 12,605 4,378
Notes payable -- 114,787
Current Portions Long-term Debt (6,000) --
----------- -----------
Total Long-Term Liabilities 6,605 119,165
----------- -----------
Total Liabilities 336,048 915,928
----------- -----------
MINORITY INTEREST 34,780 241,203
----------- -----------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par, 6% cumulative,
non-voting, class A; 10,000 shares authorized;
0 and 727 shares issued and outstanding 566,000 1
Convertible preferred stock, non-voting, non-cumulative
class B; 20,000 shares authorized; 15,075 shares
issued and outstanding 1,344,630 1,605,540
Common stock, $.001 par value; 50,000,000 shares
authorized; 8,180,099 and 7,366,099 shares issued
and outstanding 8,180 7,366
Additional paid-in capital 3,546,523 4,130,066
Accumulated deficit (4,321,350) (3,865,302)
----------- -----------
Total Stockholders' Equity 1,143,983 1,877,671
----------- -----------
$ 1,514,811 $ 3,034,802
=========== ===========
See accompanying notes to financial statements.
4
DIAMOND EQUITIES, INC.
Statements of Income
(Unaudited)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
-------------------------- ------------------------
2000 1999 2000 1999
----------- ----------- ---------- ----------
Net sales $ 142,930 $ 396,170 487,403 1,099,474
Less cost of sales 63,785 137,286 275,076 457,938
----------- ----------- ---------- ----------
Gross profit 79,145 258,885 212,327 641,536
Selling, general and administrative expenses 181,370 254,945 614,272 938,338
----------- ----------- ---------- ----------
Operating income or (loss) (102,225) 3,940 (401,945) (296,802)
----------- ----------- ---------- ----------
Other income and (expenses), net 5,841 (11,795) 17,558 (18,871)
Income (loss) from discontinued operations -- -- -- --
Minority Interest 10,033 (14,391) 31,520 14,295
Gain on sale of assets -- 1,000 -- 1,000
Loss on investments (41,100) -- (200,000) --
----------- ----------- ---------- ----------
Net income (loss) before income taxes (127,451) (21,246) (552,866) (300,378)
Provision for income taxes -- -- -- --
----------- ----------- ---------- ----------
Net income or (loss) before preferred dividends (127,451) (21,246) (552,866) (300,378)
Preferred dividends 907 153 2,670 153
=========== =========== ========== ==========
Net loss attributed to common stock (126,544) $ (21,399) (550,196) (300,378)
=========== =========== ========== ==========
Net income or (loss) per share $ (.02) $ (.00) (.07) (.06)
=========== =========== ========== ==========
Weighted Average Shares Outstanding 8,030,099 4,766,099 7,587,432 4,766,099
=========== =========== ========== ==========
See accompanying notes to financial statements.
5
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended March 31,
------------------------
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(552,866) $(300,531)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority Interest 31,520 128,072
Depreciation and amortization 158,235 19,714
Loss on Investments 200,000 --
Changes in operating assets and liabilities
(Increase) decrease in
Receivables - trade and other 135,184 (84,400)
Inventory 104,466 (58,074)
Prepaid expenses and other 32,815 3,328
Increase (decrease) in
Accounts payable (223,310) 83,642
Accrued liabilities (51,568) 4,665
--------- ---------
Net Cash Used in Operating Activities (165,524) (203,584)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (17,254) (12,867)
Proceeds form sale of assets -- 50,759
Cash paid for investments -- (375,000)
Cash received from notes receivable 216,875 --
Cash received from CDS -- 256,955
--------- ---------
Net Cash Used by Investing Activities $ 199,621 $ (80,153)
========= =========
See accompanying notes to financial statements.
6
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months
Ended March 31,
-----------------------
2000 1999
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash advanced from Lines of Credit $ -- $ 40,000
Principal payments on notes payable (190,208) (153,609)
Cash paid on Line of Credit -- (95,200)
Dividends paid -- (153)
Cash received from issuance of preferred stock 277,640 --
Adjustment for equity method of recording GoProfit (107,336) --
--------- ---------
Net Cash Provided (Used) by Financing Activities (19,904) (218,962)
--------- ---------
INCREASE (DECREASE) IN CASH 14,193 (502,699)
CASH, BEGINNING OF PERIOD 210,035 600,231
--------- ---------
CASH, END OF PERIOD $ 224,228 $ 97,532
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ --
========= =========
Cash paid for interest $ 2,642 $ 40,569
========= =========
See accompanying notes to financial statements.
7
Diamond Equities, Inc.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
Diamond Equities, Inc. (the "Company") has elected to omit substantially all
footnotes to the financial statements for the three months ended March 31, 2000,
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 June 30, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustment which
are, in the opinion of management, necessary to properly reflect the results of
the interim period presented. The information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
CHANGE IN ACCOUNTING POLICY
During the quarter ended September 30, 1999, the GoProfit.com board of directors
authorized the issuance of common stock to employees and officers of GoProfit
pursuant to a stock option plan, thus removing Diamond Equities as a major
shareholder. Diamond currently owns 37% of the outstanding stock of GoProfit.com
and records its investment in Goprofit using the equity method. In November 1999
other shareholders of GoProfit gave Diamond their proxy vote, thus giving
Diamond voting control over GoProfit.
8
Diamond Equities, Inc.
March 31, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash and cash equivalents totaled $224,228 at March 31, 2000 compared to
$210,035 at June 30, 1999. The increase in cash was due primarily to the receipt
of cash from Note Receivables of $221,000 and the issuance of Precision Plastics
preferred stock for $277,640. The Company also used approximately $165,000 to
settle the debt to the sellers of Accurate Thermoplastics and with the change of
reporting the Company's investment with GoProfit.com using the equity method
instead of consolidating the entities, $107,000 in cash was removed from the
books. The Companies current cash requirements are for the operations of the
Company, the purchase of inventory and payments on commitments and debt. During
the three quarters ended March 31, 2000, the Company has received $23,000 from
the Tru-Tel Note receivable, per the payment agreement, however, the Company has
been notified that Tru-Tel is going through a reorganization bankruptcy and
therefore collection on this note becomes questionable.
Long term cash requirements, other than normal operating expenses, are
anticipated for the acquisition of additional plastic operations. The Company
will need to raise additional funds from investors in order to complete
additional acquisitions. The Company believes that its existing cash and
anticipated cash generated from operations will be sufficient to satisfy its
currently anticipated cash requirements for fiscal year 2000.
The Company's principal commitments at March 31, 2000 consists of obligations
under capital leases and operating leases for facilities.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $142,930 with cost of sales of
$63,785, and a gross profit of $79,145, for the quarter ended March 31, 2000 as
compared to revenues of $396,176 with cost of sales of $137,286 and gross profit
of $258,885 for the same period last year. The decrease in sales is due to the
decrease in operations in the plastic company, with the loss of some major
customers.
Selling, general and administrative expenses were $181,370 for the third quarter
2000 a decrease of $73,575 over the same period last year. The decrease is
primarily due to the decrease in operations for the plastics company and for
Diamond Equities.
Management anticipates that general selling and administrative expenses will
continue to remain constant.
The Company incurred a loss of $(127,451) for the third quarter 2000 compared to
a loss of $(21,246) for the same timely period a year ago. The Company recorded
a 41,100 loss during this quarter in connection with our investment in
GoProfit.com, which is an unrecognized non-cash loss from recording our interest
in their losses.
9
Diamond Equities, Inc.
March 31, 2000
There are no seasonal aspects of the Company's business which had, or are
expected to have, a material effect on the financial conditions or results of
operations, however, the second quarter is typically the slowest quarter for
Precision Plastics.
PLAN OF OPERATIONS
The Company's plan for 2000 is to acquire additional plastic operations and
consolidate the operations for maximum efficiency and profit and/or increase
revenues generated from our existing plastic company. The Company is also
continuing to search for other viable business operations in the internet
industry to enhance our current investment in GoProfit.com. The current
management of the Company has become the new management of GoProfit.com, and
therefore will be more involved in assisting GoProfit in obtaining it goals to
become publically traded, and enhancing its website features. The Company also
anticipates filing a registration statement with the SEC for Precision Plastics
Molding, thus making it a public company as well.
PART II OTHER INFORMATION
ITEM 3(b) DEFAULTS UPON SENIOR SECURITIES
The Company is 51 months in arrears ($194,023) as of May 14, 2000, in the
payment of dividends to the shareholders of the Class A 6% Preferred Stock. No
demand has yet been made on the Company by the Preferred shareholders.
10
Diamond Equities, Inc.
March 31, 2000
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.
Date: May 22, 2000 Diamond Equities, Inc.
By: /s/ David Westfere
------------------------------------
David Westfere, CEO and
Principal Financial Officer
11