10QSB 1 e-5721.txt QUARTERLY REPORT FOR QTR ENDING 9-30-2000 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, 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. ------------------------------------------------------ (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, 2000, Diamond Equities, Inc. Registrant had 8,280,099 shares of its $0.001 par value common stock outstanding. FORM 10-Q FIRST QUARTER 2001 DIAMOND EQUITIES, INC. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Balance Sheets - September 30, 2000 and June 30, 2000........... 3-4 Statements of Operations for the Three Months Ended September 30, 2000 and 1999............................... 5 Statement of Cash Flows - for the Three Months Ended September 30, 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
September 30, June 30, 2000 2000 -------- -------- (Unaudited) (Audited) CURRENT ASSETS Cash $139,532 $125,049 Receivables Trade accounts, net of allowance for doubtful accounts of $9,960 at September 30, 2000 and June 30, 2000 160,273 83,607 Interest Receivable 3,281 3,281 Inventory 96,061 98,581 Note Receivable-current portion 15,750 15,750 -------- -------- Total Current Assets 414,897 326,268 -------- -------- PROPERTY AND EQUIPMENT 564,483 617,956 -------- -------- OTHER ASSETS Other Assets 6,750 6,750 -------- -------- Total Other Assets 6,750 6,750 -------- -------- $986,130 $950,974 ======== ========
See accompanying notes to financial statements. 3 DIAMOND EQUITIES, INC. Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30, 2000 2000 ----------- ----------- CURRENT LIABILITIES Accounts payable $ 189,052 $ 143,549 Accrued expenses 47,458 56,443 Accrued preferred dividends 20,624 17,784 Capital lease obligation-current portion 2,091 2,091 Current portion Long term debt -- -- ----------- ----------- Total Current Liabilities 259,225 219,867 ----------- ----------- LONG-TERM LIABILITIES Capital lease obligations 1,782 2,287 Notes payable 15,000 -- ----------- ----------- Total Long-term liabilities 16,782 2,287 ----------- ----------- Total Liabilities 276,007 222,154 ----------- ----------- MINORITY INTEREST 262,116 231,258 ----------- ----------- 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; 7,366,099 shares issued and outstanding 8,280 8,280 Additional paid-in capital 3,606,391 3,606,391 Accumulated deficit (4,875,349) (4,825,794) ----------- ----------- Total Stockholders' Equity 448,007 497,562 ----------- ----------- $ 986,130 $ 950,974 =========== ===========
See accompanying notes to financial statements. 4 DIAMOND EQUITIES, INC. Statements of Operations (Unaudited) For the Three Months Ended September 30, --------------------------- 2000 1999 ----------- ----------- Net sales $ 298,642 $ 230,562 Less cost of sales 156,131 146,620 ----------- ----------- Gross profit 142,511 83,942 Selling, general and administrative expenses 179,836 246,709 ----------- ----------- Operating income or (loss) (37,325) (162,767) ----------- ----------- Other income and (expenses), net 5,545 (9,072) Loss on investment in GoProfit (10,000) (113,400) Minority Interest (7,775) 12,828 ----------- ----------- Net income (loss) before income taxes (49,555) (272,411) Provision for income taxes -- -- ----------- ----------- Net loss $ (49,555) $ (272,411) =========== =========== Net income or (loss) per share $ (.01) $ (.04) =========== =========== Weighted Average Shares Outstanding 8,280,099 7,366,099 =========== =========== See accompanying notes to financial statements. 5 DIAMOND EQUITIES, INC. Statements of Cash Flows (Unaudited) For the Three Months Ended September 30, -------------------------- 2000 1999 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(49,555) $(272,411) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 53,473 53,250 Minority interest 7,775 (12,828) Unrealized loss on Investment -- 113,400 Changes in operating assets and liabilities (net of acquisition) (Increase) decrease in Receivables - trade and other (76,666) (44,257) Inventory (2,520) 73,111 Prepaid expenses and other -- 1,699 Increase (decrease) in Accounts payable 48,626 (11,304) Accrued liabilities (6,145) (3,209) -------- --------- Net Cash Used in Operating Activities (25,012) (102,549) -------- --------- 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 -- (7,000) Cash paid for acquisition of Accurate -- 221,875 -------- --------- Net Cash Provided by Investing Activities $ 25,000 $ 214,830 ======== ========= See accompanying notes to financial statements. 6 DIAMOND EQUITIES, INC. Statements of Cash Flows (Continued) (Unaudited)
For the Three Months Ended September 30, -------------------------- 2000 1999 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes payable $ (505) $ (13,399) Cash received from debt financing 15,000 -- Cash received for issuance of preferred stock -- 180,000 Cash adjustment for equity method of recording-GoProfit -- (107,336) --------- --------- Net Cash Provided (Used) by Financing Activities 14,495 59,265 --------- --------- INCREASE (DECREASE) IN CASH 14,483 171,546 CASH, BEGINNING OF PERIOD 125,049 210,035 --------- --------- CASH, END OF PERIOD $ 139,532 $ 381,581 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ -- $ -- ========= ========= Cash paid for interest $ 18 $ 574 ========= =========
See accompanying notes to financial statements. 7 Diamond Equities, Inc. September 30, 1999 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, 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 adjustments 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%. 8 Diamond Equities, Inc. September 30, 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 $139,532 at September 30, 2000 compared to $125,049 at June 30, 2000. The increase in cash was due primarily to the receipt of cash from a Note Payable of $15,000. The Company also used approximately $25,000 in operations and received $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 September 30, 2000 consists of obligations under capital leases and operating leases for facilities. RESULTS OF OPERATIONS The Company generated revenues from operations of $298,642 with cost of sales of $156,131, and a gross profit of $142,511, for the quarter ended September 30, 2000 as compared to revenues of $230,562 with cost of sales of $146,620 and gross profit of $83,942 for the same period last year. The increase in sales is due to the increase in operations in the plastic company. Selling, general and administrative expenses were $179,836 for the first quarter 2001 a decrease of $66,873 over the same period last year. The decrease is primarily due to the fine tuning of the plastics company and Diamond Equities. Management anticipates that general selling and administrative expenses will continue to remain constant. The Company incurred a loss of $(49,555) for the first quarter 2001 compared to a loss of $(272,411) for the same time period a year ago. The $222,856 increase in net income is due to the increase of gross margin of $58,569 , 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. September 30, 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. 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 16 months in arrears ($20,624) as of November 15, 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. September 30, 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: November 20, 2000 Diamond Equities, Inc. By: /s/ David Westfere ------------------------------------- David Westfere, CEO By: /s/ Todd D. Chisholm ------------------------------------- Todd D. Chisholm, CFO 11