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 September 30, 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 October 31, 2001, Diamond Equities, Inc. had 8,480,099 shares of its
$0.001 par value common stock outstanding.
Diamond Equities, Inc.
Form 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Balance Sheets - September 30, 2001 and June 30, 2001.............. 3-4
Statements of Operations for the Three Months
Ended September 30, 2001 and 2000.................................. 5
Statement of Cash Flows - for the Three Months
Ended September 30, 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
September 30, June 30,
2001 2001
------------- --------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $125,811 $108,713
Receivables
Trade accounts, net of allowance for doubtful
accounts of $10,000 at September 30, 2001 and
June 30, 2001 64,872 110,687
Interest Receivable -- --
Inventory 88,840 71,989
Note Receivable-current portion -- --
-------- --------
Total Current Assets 279,523 291,389
-------- --------
PROPERTY AND EQUIPMENT 352,272 402,534
-------- --------
OTHER ASSETS
Other Assets 7,941 7,941
-------- --------
Total Other Assets 7,941 7,941
-------- --------
$639,736 $701,864
======== ========
See accompanying notes to financial statements.
3
Diamond Equities, Inc.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
2001 2001
----------- -----------
CURRENT LIABILITIES
Accounts payable $ 189,967 $ 154,828
Accrued expenses 96,397 97,295
Accrued preferred dividends 36,521 31,874
Capital lease obligation-current portion 1,734 2,287
Current portion Long term debt 55,000 50,000
----------- -----------
Total Current Liabilities 379,619 336,284
----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations -- --
Notes payable 15,000 15,000
----------- -----------
Total Long-term liabilities 15,000 15,000
----------- -----------
Total Liabilities 394,619 351,284
----------- -----------
MINORITY INTEREST 131,970 164,736
----------- -----------
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; 14,794 shares issued
and outstanding 1,663,120 1,663,120
Common stock, $.001 par value; 50,000,000 shares
authorized; 8,480,099 shares issued and outstanding 8,480 8,480
Additional paid-in capital 3,651,756 3,651,756
Accumulated deficit (5,210,210) (5,137,513)
----------- -----------
Total Stockholders' Equity 113,147 185,844
----------- -----------
$ 639,736 $ 701,864
=========== ===========
See accompanying notes to financial statements.
4
Diamond Equities, Inc.
Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
---------------------------
2001 2000
----------- -----------
Net sales $ 129,054 $ 298,642
Less cost of sales 123,495 156,131
----------- -----------
Gross profit 5,559 142,511
Selling, general and administrative expenses 107,926 179,836
----------- -----------
Operating income or (loss) (102,367) (37,325)
----------- -----------
Other income and (expenses), net (3,095) 5,545
Loss on investment in GoProfit -- (10,000)
Minority Interest 32,766 (7,775)
----------- -----------
Net income (loss) before income taxes (72,696) (49,555)
Provision for income taxes -- --
----------- -----------
Net loss $ (72,696) $ (49,555)
=========== ===========
Net income or (loss) per share $ (.01) $ (.01)
=========== ===========
Weighted Average Shares Outstanding 8,480,099 8,280,099
=========== ===========
See accompanying notes to financial statements.
5
Diamond Equities, Inc.
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(72,696) $(49,555)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 50,262 53,473
Minority interest (32,766) 7,775
Unrealized loss on Investment -- --
Changes in operating assets and liabilities (net of acquisition)
(Increase) decrease in
Receivables - trade and other 45,815 (76,666)
Inventory (16,851) (2,520)
Prepaid expenses and other -- --
Increase (decrease) in
Accounts payable 35,139 48,626
Accrued liabilities 3,749 (6,145)
-------- --------
Net Cash Used in Operating Activities 12,652 (25,012)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- --
Cash received from sale of investment in sub -- 25,000
-------- --------
Net Cash Provided by Investing Activities $ -- $ 25,000
-------- --------
See accompanying notes to financial statements.
6
Diamond Equities, Inc.
Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (554) $ (505)
Cash received from debt financing 5,000 15,000
Cash received for issuance of preferred stock -- --
Cash adjustment for equity method of recording-GoProfit -- --
--------- ---------
Net Cash Provided (Used) by Financing Activities 4,446 14,495
--------- ---------
INCREASE (DECREASE) IN CASH 17,098 14,483
CASH, BEGINNING OF PERIOD 108,713 125,049
--------- ---------
CASH, END OF PERIOD $ 125,811 $ 139,532
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ --
========= =========
Cash paid for interest $ 105 $ 18
========= =========
See accompanying notes to financial statements.
7
Diamond Equities, Inc.
September 30, 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 three months ended September 30,
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, 2001.
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.
NOTE PAYABLE-RELATED PARTY
During the 1st quarter 2002, the Company received $5,000 as a loan from a
shareholder. The terms require the company to repay the debt on demand.
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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 $125,811 at September 30, 2001 compared
to $108,713 at June 30, 2001. The increase in cash was due primarily to the
receipt of cash from a Note Payable of $5,000, and the cash generated from
operations of approximately $12,600. 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. The Company will need to raise funds to
assemble and market the motorcycle division. 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 2002.
The Company's principal commitments at September 30, 2001 consists of
obligations under capital leases and operating leases for facilities.
RESULTS OF OPERATIONS
The Company generated revenues from operations of $129,054 with cost of
sales of $123,495, and a gross profit of $5,559, for the quarter ended September
30, 2001 as compared to revenues of $298,642 with cost of sales of $156,131 and
gross profit of $142,511 for the same period last year. The decrease in sales is
due to the increased difficulties in the economy and thus the decreases in
orders taken from our clients of the plastic company.
Selling, general and administrative expenses were $107,926 for the first
quarter 2002 a decrease of $71,910 over the same period last year. The decrease
is primarily due to the decrease in operations and staff of the plastics company
and Diamond Equities.
Management anticipates that general selling and administrative expenses
will continue to remain constant and to increase as operations increase.
The Company incurred a loss of $(72,696) for the first quarter 2002
compared to a loss of $(49,555) for the same time period a year ago. The $23,000
decrease in net loss is due to the decrease in sales this quarter, leaving a
small gross profit of $5,559, a decrease in gross margin of nearly $140,000.
9
The second fiscal quarter ended December 31 is typically the slowest
quarter because our clients slow down or shut down operations during the holiday
season. The plastics operation will therefore, shut down for a few weeks in
December. There are no other 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.
PLAN OF OPERATIONS
The Company's plan for 2002 is to increase sales in the plastic operations
and continue to 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 28 months in
arrears ($35,623) as of November 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: November 21, 2001
Diamond Equities, Inc.
By: /s/ David Westfere
------------------------------------
David Westfere, CEO
By: /s/ Todd D. Chisholm
------------------------------------
Todd D. Chisholm, CFO
11