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 December 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
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
216 South Alma School Rd, Suite 10, Mesa, Az 85210
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(Address of Principal Executive Offices)
(602) 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 February 14, 2001, Diamond Equities, Inc. Registrant had 8,280,099 shares
of its $0.001 par value common stock outstanding.
DIAMOND EQUITIES, INC.
FORM 10-Q
SECOND QUARTER 2001
INDEX
Page
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PART I. FINANCIAL INFORMATION
Balance Sheets - December 31, 2000 and June 30, 2000.................. 3-4
Statements of Operations for the Three and Six Months
Ended December 31, 2000 and 1999...................................... 5
Statement of Cash Flows - for the Six Months
Ended December 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
2
DIAMOND EQUITIES, INC.
Balance Sheets
ASSETS
December 31, June 30,
2000 2000
-------- --------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $118,329 $125,049
Receivables
Trade accounts, net of allowance for doubtful accounts
of $9,960 at December 31, 2000 and June 30, 2000 66,421 83,607
Interest Receivable 3,281 3,281
Inventory 113,159 98,581
Note Receivable-current portion 15,750 15,750
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Total Current Assets 316,940 326,268
-------- --------
PROPERTY AND EQUIPMENT 511,010 617,956
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OTHER ASSETS
Other Assets 6,750 6,750
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Total Other Assets 6,750 6,750
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$834,576 $950,974
======== ========
See accompanying notes to financial statements.
3
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
2000 2000
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 169,246 $ 143,549
Accrued expenses 42,149 56,443
Accrued preferred dividends 26,191 17,784
Capital lease obligation-current portion 2,091 2,091
Current portion Long term debt -- --
----------- -----------
Total Current Liabilities 239,677 219,867
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LONG-TERM LIABILITIES
Capital lease obligations 1,266 2,287
Notes payable 30,000 --
----------- -----------
Total Long-term liabilities 31,266 2,287
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Total Liabilities 270,943 222,154
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MINORITY INTEREST 221,683 231,258
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STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par, 6% cumulative,
non-voting, series A; 18,000 shares authorized; 250 shares
issued and outstanding, liquidation preference of $250,000 1 1
Convertible preferred stock, non-voting, non-cumulative
series B; 18,000 shares authorized; 15,194 shares issued
and outstanding 1,708,684 1,708,684
Common stock, $.001 par value; 50,000,000 shares authorized;
8,280,099 shares issued and outstanding 8,280 8,280
Additional paid-in capital 3,606,391 3,606,391
Accumulated deficit (4,981,406) (4,825,794)
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Total Stockholders' Equity 341,950 497,562
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$ 834,576 $ 950,974
=========== ===========
See accompanying notes to financial statements.
4
DIAMOND EQUITIES, INC.
Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
December 31, December 31,
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2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales $ 77,807 $ 113,911 $ 376,449 $ 344,473
Less cost of sales 154,190 109,383 310,321 300,716
----------- ----------- ----------- -----------
Gross profit (76,383) 4,528 66,126 43,757
Selling, general and
administrative expenses 57,425 141,481 227,455 343,477
----------- ----------- ----------- -----------
Operating income or (loss) (133,808) (136,953) (161,329) (299,720)
----------- ----------- ----------- -----------
Other income and (expenses), net (14,077) 32,506 (8,532) 11,717
Loss on investment in GoProfit (45,500) (10,000) 158,900
Preferred dividends (9,804)
Minority Interest 40,432 8,659 32,657 21,487
----------- ----------- ----------- -----------
Net income (loss) before income taxes (107,453) (141,288) (157,008) (425,417)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (107,453) $ (141,288) (157,008) (425,417)
=========== =========== =========== ===========
Net income or (loss) per share $ (.01) $ (.02) $ (.02) $ (.06)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 8,280,099 7,366,099 8,280,099 7,366,099
=========== =========== =========== ===========
See accompanying notes to financial statements.
5
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
December 31,
------------------------
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(157,008) $(425,417)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 106,947 106,514
Minority interest (32,657) (21,487)
Unrealized loss on Investment -- 158,900
Changes in operating assets and liabilities
(net of acquisition)
(Increase) decrease in
Receivables - trade and other 17,186 150,185
Inventory (14,578) 87,055
Prepaid expenses and other -- 1,699
Increase (decrease) in accounts payable 25,697 (53,669)
Accrued liabilities (6,286) (2,938)
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Net Cash Used in Operating Activities (60,699) 842
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (45)
Cash received from sale of investment in sub 25,000 --
Cash received for notes receivable -- 216,875
Cash paid for acquisition of Accurate -- --
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Net Cash Provided by Investing Activities $ 25,000 $ 216,830
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See accompanying notes to financial statements.
6
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Six Months Ended
December 31,
-------------------------
2000 1999
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (1,021) $(186,478)
Cash received for issuance of preferred stock -- 180,000
Cash received from debt financing 30,000 --
Cash adjustment for equity method of recording-GoProfit -- (107,336)
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Net Cash Provided (Used) by Financing Activities 28,979 (113,814)
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INCREASE (DECREASE) IN CASH (6,720) 103,858
CASH, BEGINNING OF PERIOD 125,049 210,035
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CASH, END OF PERIOD $ 118,329 $ 313,893
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ --
========= =========
Cash paid for interest $ 276 $ 574
========= =========
See accompanying notes to financial statements.
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Diamond Equities, Inc.
December 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 six months ended December 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, 2000.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all normal and
recurring 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 MINORITY INTEREST
During the quarter ended September 30, 2000, the Company received 1,800,000
shares of Precision Plastics common stock in satisfaction of inter-company debt.
Diamond Equities also sold 100,000 shares of Precision common stock to a
shareholder of Diamond and Precision for $25,000. With these two changes,
Diamond equities owns 62% of Precision Plastics, and a 38% minority interest
exists.
NOTE PAYABLE-RELATED PARTY
During the 1st quarter 2001, the Company received 15,000 as a loan from
Go-Profit.com. The terms require the company to repay the debt by March 25,
2002, and bears interest at 10%.
During the 2nd quarter 2001, the Company received a $15,000 loan from Derby
Holdings, a shareholder of the Company.
PRIOR PERIOD RESTATEMENT
Cost of goods sold for the three and six months ended December 31, 1999, have
been restated to include depreciation on the machinery, in order to be
comparative with the December 31, 2000 figures.
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Diamond Equities, Inc.
December 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 $118,329 at Decmeber 31, 2000 compared to
$125,049 at June 30, 2000. The change in cash was due primarily to the receipt
of cash from Notes Payable of $30,000, the use of approximately $60,000 in
operations and the receipt of $25,000 from the sale of Diamond held Precision
stock to investors of Diamond. The Companies current cash requirements are for
the operations of the Company, the purchase of inventory and payments on
commitments and debt.
Long term cash requirements, other than normal operating expenses, are
anticipated for the acquisition of additional ventures, however, funds will need
to be raised to support such new ventures. In October 2000, the Company signed
an agreement to acquire 80% of the common stock of RealMotorcycle.com, Inc., a
company that holds the marketing and distribution rights to the "Pagsta" custom
motorcycle which is being marketed through Harley Davidson dealers as a custom
Harley. The company also has a website from which it will distribute apparel and
other motorcycle parts and accessories. RealMotorcycle will raise funds from a
line of credit and a private placement to fund its operations. No cash was
required in the acquisition of RealMotorcycle.com. The Company will need to
raise additional funds from investors in order to complete additional
acquisitions if identified. 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 2001.
The Company's principal commitments at December 31, 2000 consists of obligations
under capital leases and operating leases for facilities.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $ 77,807 with cost of sales of
$154,190, and a gross loss of $(76,383), for the quarter ended December 31, 2000
as compared to revenues of $113,911 with cost of sales of $109,383 and gross
profit of $4,528 for the same period last year. The decrease in sales is due to
the loss of a major customer in early 2000. The negative gross margin is due to
depreciation on the molding equipment of approximately $44,000 per quarter and
the overhead salaries of approximately $34,000 per quarter.
Selling, general and administrative expenses were $57,425 for the second quarter
2001 a decrease of $84,056 over the same period last year. The decrease is
primarily due to the fine tuning of the plastics company and Diamond Equities
and a decrease in operations.
Management anticipates that general selling and administrative expenses will
continue to remain constant.
The Company incurred a loss of $(107,453) for the second quarter 2001 compared
to a loss of $(141,288) for the same time period a year ago. The $33,835
increase in net income is due to the decrease of general and administrative
expenses and the lack of recorded losses in connection with our investment in
GoProfit.com in fiscal 2000.
9
Diamond Equities, Inc.
December 31, 2000
The second fiscal quarter is typically the slowest quarter of the year, due to
the holidays and the seasonal aspect to the orders of our customers. No other
seasonal aspects of the Company's business are expected to have a material
effect on the financial conditions or results of operations.
PLAN OF OPERATIONS
The Company's plan for 2001 is to increase sales in the plastic operations and
explore the development of the operations of RealMotorcycle.com in order to
generate significant revenues from that entity. The Company will also continue
to search for other viable business operations.
PART II OTHER INFORMATION
ITEM 3(b) DEFAULTS UPON SENIOR SECURITIES
The Company converted the original Class A Preferred dividends in the amount of
$194,023 to Preferred Series B. The Company is currently 19 months in arrears
($24,374) as of February 15, 2001, 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.
December 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: February 19, 2001
Diamond Equities, Inc.
By: /s/ David Westfere
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David Westfere, CEO
By: /s/ Todd D. Chisholm
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Todd D. Chisholm, CFO
11