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, 2001
[ ] 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.
(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 Rd, Suite 10, Mesa, Az 85210
(Address of Principal Executive Offices)
(602) 462-5900
(Registrant's telephone number, including area code)
N/A
(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 May 15, 2001, Diamond Equities, Inc. Registrant had 8,280,099 shares of
its $0.001 par value common stock outstanding.
FORM 10-Q
THIRD QUARTER 2001
Diamond Equities, Inc.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Balance Sheets - March 31, 2001 and June 30, 2000.............. 3-4
Statements of Operations for the Three and Nine Months
Ended March 31, 2001 and 2000.................................. 5
Statement of Cash Flows - for the Nine Months
Ended March 31, 2001 and 2000.................................. 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
March 31, June 30,
2001 2000
-------- --------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 90,178 $ 125,049
Receivables
Trade accounts, net of allowance for doubtful accounts
of $9,960 at March 31, 2001 and June 30, 2000 105,875 83,607
Interest Receivable 3,596 3,281
Inventory 118,887 98,581
Note Receivable-current portion 15,750 15,750
--------- ---------
Total Current Assets 334,286 326,268
--------- ---------
PROPERTY AND EQUIPMENT 449,344 617,956
--------- ---------
OTHER ASSETS
Other Assets 6,750 6,750
--------- ---------
Total Other Assets 6,750 6,750
--------- ---------
$ 790,380 $ 950,974
========= =========
See accompanying notes to financial statements.
3
DIAMOND EQUITIES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
2001 2000
----------- -----------
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable $ 154,868 $ 143,549
Accrued expenses 41,548 56,443
Accrued preferred dividends 28,124 17,784
Capital lease obligation-current portion 2,236 2,091
Current portion Long term debt -- --
----------- -----------
Total Current Liabilities 226,776 219,867
----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations 591 2,287
Notes payable 50,000 --
----------- -----------
Total Long-term liabilities 50,591 2,287
----------- -----------
Total Liabilities 277,367 222,154
----------- -----------
MINORITY INTEREST 206,806 231,258
----------- -----------
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 (5,017,149) (4,825,794)
----------- -----------
Total Stockholders' Equity 306,207 497,562
----------- -----------
$ 790,380 $ 950,974
=========== ===========
See accompanying notes to financial statements.
4
DIAMOND EQUITIES, INC.
Statements of Operations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net sales $ 172,109 $ 142,930 $ 548,558 $ 487,403
Less cost of sales 118,584 107,511 428,907 406,252
----------- ----------- ----------- -----------
Gross profit 53,525 35,419 119,651 81,151
Selling, general and
administrative expenses 117,754 136,737 345,210 480,426
----------- ----------- ----------- -----------
Operating income or (loss) (64,229) (101,318) (225,559) (399,275)
----------- ----------- ----------- -----------
Other income and (expenses), net 2,660 5,841 10,640 17,558
Loss on investment in GoProfit (41,100) (10,000) (200,000)
Preferred dividends (5,564) (15,368) (2,670)
Minority Interest 14,878 10,033 47,535 31,520
----------- ----------- ----------- -----------
Net income (loss) before income taxes (52,255) (126,544) (192,752) (552,866)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (52,255) $ (126,544) (192,752) (552,866)
=========== =========== =========== ===========
Net income or (loss) per share $ (.01) $ (.02) $ (.02) $ (.07)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 8,280,099 8,030,099 8,280,099 7,587,432
=========== =========== =========== ===========
See accompanying notes to financial statements.
5
DIAMOND EQUITIES, INC.
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
March 31,
-------------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(192,752) $(425,417)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 160,430 106,514
Minority interest (47,535) (21,487)
Unrealized loss on Investment -- 158,900
Changes in operating assets and liabilities (net of acquisition)
(Increase) decrease in
Receivables - trade and other (22,583) 150,185
Inventory (20,306) 87,055
Prepaid expenses and other -- 1,699
Increase (decrease) in
Accounts payable 11,319 (53,669)
Accrued liabilities (4,555) (2,938)
--------- ---------
Net Cash Used in Operating Activities (115,982) 842
--------- ---------
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 received from sale of assets 7,662 --
--------- ---------
Net Cash Provided by Investing Activities $ 32,662 $ 216,830
--------- ---------
See accompanying notes to financial statements.
6
DIAMOND EQUITIES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
March 31,
---------------------------
2001 2000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (1,551) $(186,478)
Cash received for issuance of preferred stock -- 180,000
Cash received from debt financing 50,000 --
Cash adjustment for equity method of recording-GoProfit -- (107,336)
--------- ---------
Net Cash Provided (Used) by Financing Activities 48,449 (113,814)
--------- ---------
INCREASE (DECREASE) IN CASH (34,871) 103,858
CASH, BEGINNING OF PERIOD 125,049 210,035
--------- ---------
CASH, END OF PERIOD $ 90,178 $ 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.
7
Diamond Equities, Inc.
March 31, 2001
Notes to Financial Statements (Unaudited)
GENERAL
Diamond Equities, Inc. (the "Company") has elected to omit substantially all
footnotes to the financial statements for the nine months ended March 31, 2001,
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 and 3rd quarters of 2001, the Company received a $35,000 loan
from Derby Holdings, a shareholder of the Company.
PRIOR PERIOD RESTATEMENT
Cost of goods sold for the three and nind months ended March 31, 2000, have been
restated to include depreciation on the machinery, in order to be comparative
with the March 31, 2001 figures.
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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 $90,178 at March 31, 2001 compared to $125,049
at June 30, 2000. The change in cash was due primarily to the receipt of cash
from Notes Payable of $50,000, the use of approximately $115,000 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 are for the support of normal operating expenses,
payments on our remaining capital lease obligation, and the payment of preferred
dividends. If found, funds are anticipated for the acquisition of additional
ventures, however, funds will need to be raised to support such new ventures, or
to expand operations through a sales force. The company has not currently
located any additional acquisitions. In October 2000, the Company signed an
agreement to acquire 80% of the common stock of Real Motorcycle.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 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 March 31, 2001 consists of obligations
under capital leases and operating leases for facilities.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $ 172,109 with cost of sales
of $118,584, and a gross margin of $53,525, for the quarter ended March 31, 2001
as compared to revenues of $142,930 with cost of sales of $107,511 and gross
profit of $35,419 for the same period last year. The 20% increase in sales is
due to the increased volume of injection molding. The increase also increased
our profit margin 9% over the same period last year.
Selling, general and administrative expenses were $117,754 for the third quarter
2001 a decrease of $18,983 over the same period last year. The decrease is
primarily due to the decrease in personnel, and tother overhead expenses and the
continuing effort to minimize our operation expenses.
Management anticipates that general selling and administrative expenses will
continue to remain constant.
The Company incurred a loss of $(52,255) for the third quarter 2001 compared to
a loss of $(126,544) for the same time period a year ago. The $74,289 increase
in net income is due to the increase in sales, the increase in gross margin and
the decrease in wages and overhead expenses.
9
The 2nd 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. RealMotorcycle has sent its
prototype motorcycle to paint and it will be finished in June 2001. The company
has ordered 20 bikes which will be completed in July. RealMotorcycle will then
begin to sell the Pagsta to Harley Dealers. The assembly is being performed in a
suite of the facilities of Precision Plastics in Mesa Arizona. 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 22 months in arrears
($28,124) as of May 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
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 17, 2001 Diamond Equities, Inc.
By: /s/ David Westfere
------------------------------------
David Westfere, CEO
By: /s/ Todd D. Chisholm
------------------------------------
Todd D. Chisholm, CFO
11