-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K9NRQnWGpCzpl8V08RI/euKVreW6oxtXmq7fmfPkyv3GqWHI8a4VRPZnsnlG3By0 kgQAqNZDJEAUU1YSU+goDQ== 0000950147-99-001124.txt : 19991018 0000950147-99-001124.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950147-99-001124 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAMOND EQUITIES INC CENTRAL INDEX KEY: 0000923150 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 880232816 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-24138 FILM NUMBER: 99727845 BUSINESS ADDRESS: STREET 1: 2010 E UNIVERSITY DR STREET 2: STE 3 CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 6028298777 FORMER COMPANY: FORMER CONFORMED NAME: UNITED PAYPHONE SERVICES INC DATE OF NAME CHANGE: 19940516 10KSB40 1 ANNUAL REPORT F.T.Y.E. ENDED 6/30/99 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year June 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from: ____________ to: ____________ Commission File Number. 0 27138 DIAMOND EQUITIES, INC. ---------------------------------------------- (Name of Small Business Issuer in its Charter) Nevada 88-0232816 ------------------------------ --------------------------------- State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization 216 S. Alma School Road, Mesa, Arizona 85210 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (602) 462-5900 ------------------------------------------------ (Issuer's Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share Class A Warrants Class B Warrants Check whether the issuer: (1) filed all Reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check here if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The Issuer's revenues for the year ended June 30, 1999, were $1,368,510. The market price of the voting stock held by non-affiliates (approximately 1,332,417 shares as of September 7, 1998) based upon the average of the bid and asked prices of such stock as of September 7, 1998, as reported on the Electronic Bulletin Board, was $2.25. The number of shares of Common Stock of the issuer outstanding as of September 23, 1998, was 7,266,099. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] Documents incorporated by Reference: Incorporated by reference to this annual report are Forms 8-K filed by the Registrant on March 3, 1999 and April 20, 1999, respectively, which disclose the acquisition of a company engaged in the internet commerce industry. TABLE OF CONTENTS PART I Page No. -------- Item 1. Description of Business ......................................... 3 Item 2. Description of Property ......................................... 10 Item 3. Legal Proceedings ............................................... 10 Item 4. Submission of Matters to a Vote of Security Holders ............. 11 PART II Item 5. Market Price of and Dividends on the Registrant's Common Equity and Other Stockholder Matters ............................ 11 Item 6. Management's Discussion and Analysis or Plan of Operation ....... 12 Item 7. Financial Statements ............................................ 14 Item 8. Changes in and Disagreements With Accountants ................... 14 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons .... 14 Item 10. Executive Compensation .......................................... 15 Item 11. Security Ownership of Certain Beneficial Owners and Management... 15 Item 12. Certain Relationships and Related Transactions .................. 16 Item 13. Exhibits List and Reports on Form 8-K ........................... 17 2 PART I ITEM 1. DESCRIPTION OF BUSINESS. HISTORY. The Company was organized under the laws of the State of Nevada on July 24, 1987, under the name of KTA Corporation. On September 25, 1989, the Company changed its name to United Payphone Services, Inc. At that time, the Company was in the business of operating, servicing and maintaining a system of privately-owned public pay telephones in Nevada. In January, 1990 the Company expanded its operations into Arizona. In December, 1994, the Company sold all of its pay telephone location contracts in Las Vegas, Nevada, but did not include the pay telephone equipment. All of the Nevada equipment was then relocated to Arizona where the Company did business under the name "U.S. Payphone, Inc." The Company generated revenues, after the sale of its Nevada contracts, from coin and non-coin calls made from approximately 865 telephones located and installed throughout the State of Arizona. On November 15, 1996, the Company sold substantially all of its fixed assets (the "Asset Sale") to Tru-Tel Communications, L.L.C., a Nevada limited liability company ("Tru-Tel"). The Company effected the Asset Sale because the directors determined that the changing regulatory environment and business prospects would have a negative effect on the Company's future operations. Under an asset purchase agreement (the "Asset Purchase Agreement") for $1,711,250 in cash and a secured promissory note of $811,250 (the "Tru-Tel Note"). The Tru-Tel Note is payable on a monthly basis commencing on February 15, 1997, and bears interest at the rate of 8% per annum. The final payment of all accrued and unpaid interest and outstanding principal is due on or before January 15, 2002. The Tru-Tel Note is secured by a lien on all assets transferred in the Asset Sale and is further secured by personal guarantees of the principals of Tru-Tel. The Asset Purchase Agreement prohibited the Company from engaging in, either directly or indirectly, in any business which operates public or private pay phones within the State of Arizona. In addition, the Company may not install or maintain any phone equipment, or provide related services, for any party to its existing contracts, which were sold to Tru-Tel. In early 1997, Tru-Tel defaulted on the Tru-Tel Note and on March 18, 1997, the Company filed suit. On March 24, 1999, the parties settled the suit, with Tru-Tel's promise to pay the Company a total of Four Hundred Thousand Dollars ($450,000), payable with a cash payment of One Hundred Thousand Dollars ($100,000) and the balance in quarterly installments, secured by another Promissory Note. (See Item 3, "Legal Proceedings") Subsequent to the Asset Sale, the Company was essentially a "blank check" company, with cash and a promissory note as it's primary assets. It has since acquired businesses in the plastics manufacturing industry and in the Internet industry. These acquisitions and operations are discussed in detail below. PLASTICS INDUSTRY ACQUISTION. In November, 1997, the Company established a subsidiary, Precision Plastics Molding, Inc. ("Precision" or the "Subsidiary"), a Nevada corporation, and on June 15, 1998 the Company and Precision purchased the assets of Premier Plastics Corporation, a Tempe, Arizona private corporation engaged in the plastic injection molding business. Consideration of $80,000 in cash was paid along with the assumption of various notes and payables in the amount of approximately $40,000. In addition, the selling shareholder of Premier received 300,000 shares of common stock of the Subsidiary valued at $0.25 per share. Prior to this acquisition, the Subsidiary had no assets. The purchase price was determined by negotiations between the parties. The cash paid was from the Registrant's own funds. There was no prior relationship between Premier and its sole shareholder and the officers and directors of the Registrant or its Subsidiary. On July 15, 1998, the Company and Precision closed a transaction involving the purchase of substantially all the assets of Accurate Thermoplastics, Inc. ("Accurate") an Arizona private corporation engaged in the plastic injection molding business. The assets purchased included equipment, inventories, contract rights, customer lists, know-how, drawings, specifications and intellectual property. The sole shareholder of Accurate, Roy L. Thompson, was engaged to 3 serve as a consultant to Precision. The business of Accurate will be continued under the name Precision Plastics, Inc. Precision acquired the assets of Accurate for payment of Five Hundred Sixty Thousand Dollars ($560,000) consisting of cash and a promissory note, and in consideration for the assumption by Precision of certain liabilities of Accurate. The purchase price paid by Precision was determined by negotiations between the parties. The cash paid was from funds paid to Precision by the Registrant for 2,000,000 shares of Precision's common stock 68.9% of the outstanding common stock of Precision. There was and is no other relationship between Accurate and its sole shareholder and the officers and directors of the Registrant or Precision. On July 9, 1999, Accurate filed suit against the Company alleging breach of contract by failure to perform certain provisions of the asset purchase agreement, seeking unspecified damages. (See Item 3, "Legal Proceedings") CURRENT PLASTICS MANUFACTURING OPERATIONS AND BUSINESS. The Company, through, Precision, is actively engaged in the plastics injection molding business. The operations of Premier have been combined with those of Accurate, with both acquisitions now operating under the name of Precision Plastics Molding, Inc., and all operations are conducted at the former Accurate facility at 216 S. Alma School Rd., Mesa, AZ. The following is a brief discussion of the business conducted by Precision / the Company. BUSINESS. The business of Precision is to produce a plastic product from the customer's designs. A customer could either provide their own molds or have Precision build a mold in its facility. When a mold is completed Precision then manufactures as many or as few products as the customers desire. Most products require more than just one molded part. In most cases several parts are molded and then assembled. Precision does not always mold all of the parts for assembly nor does Precision normally do the assembly. PRODUCTS. Precision manufactures many products that are owned by its customers. Precision does not presently own the rights to any of the products that it produces. Precision offers the service of manufacturing parts for a customer's products at the level of quality they demand. MARKETING. Currently, Precision does not have a marketing or sales force. The current customers were acquired from the companies purchased. Precision intends to hire personnel to find companies that need plastic parts manufactured for their own products. CUSTOMERS/SUPPLIERS. Precision currently makes products for approximately fifteen (15) different customers. The major customers are Ryobi, Axxes and Amsafe. Management estimates that their business makes up at least seventy five percent (75%) of Precision's sales. Precision works with thirty (30) different suppliers of different products consumed in manufacturing products such as boxes and plastic resin. Precision's main suppliers of plastic are Ferro Corp, GE Plastics, Polymerland, and Plastics General Polymers. SALES. Precision has, as of September 1, 1999, a sales backlog of 2 days and has the raw materials to run production for these sales. The Company no longer has a tooling department, and now uses subcontractors for such services. It has no order backlog. INTERNET BUSINESS ACQUISITION. GoProfit.Com, Inc. on April 5, 1999, the Company entered into a Stock Purchase Agreement with GoProfit.Com, Inc., a Nevada Corporation. Under the Stock Purchase Agreement, the shareholders of GoProfit acquired six hundred thousand (600,000) shares of voting, restricted common stock of the Company in exchange for approximately ninety eight percent (98%) of the outstanding common stock of GoProfit, or 2,400,000 shares, based on the then 2,450,000 shares outstanding, as represented by GoProfit. The Agreement recognized that GoProfit had issued options to its employees and others representing seven hundred thirty five thousand (735,000) shares of common stock. In addition, the GoProfit Board Members had options for 6,000,000 shares. If all options were exercised, the percent of ownership in GoProfit by the Company would be significantly reduced to that of a minority shareholder. BUSINESS. GoProfit.com, Inc. ("GoProfit") was incorporated under the laws of the State of Nevada on March 3, 1999. The Company was formed to design and build a world wide financial search engine for the Internet. Through the 4 licensing and repackaging of proprietary technology from leading Internet purveyors of content, GoProfit.com desires to gain instant user credibility while achieving its own branded identity. At the same time, GoProfit management is working toward developing innovative technologies designed so that GoProfit becomes a "next-generation" search engine/Internet portal. An Internet portal is a service-oriented website that offers a wide range of products and services to its users and customers. Large Internet search engines such as "Yahoo", "Excite", and "Lycos" are considered Internet portals. Essentially, search engines and portals have become mutually inclusive, in that all top portal sites have some sort of search engine application. Most portals now offer Web based e-mail services and e-Commerce shopping, as well. Categorically speaking, portal sites are the most visited sites on the Internet, therefore generating the highest advertising revenues. This year, portals are expected to attract 15 percent of the Web traffic and an astounding 59 percent, or $520 million of online advertising dollars, according to Forrester Research, a trade publication. GoProfit has no operating history or revenues, must be considered entirely promotional and is in it's early development stages. As GoProfit faces all the risks inherent in any new business, including competition, the absence of both an operating history and profitability and the need for additional working capital. The likelihood of the success of GoProfit must be considered in light of the problems and expenses that are frequently encountered in connection with the operation of a new business and the competitive environment in which the Company will be operating. BUSINESS STRATEGY. GoProfit is setting out to provide world-wide financial information to the world, in all of the major languages. GoProfit hopes to help break down cultural barriers that exist within the world's financial markets. GoProfit is dedicated to providing the world-wide financial community with equal access to a wide range of financial information on a timely basis. GoProfit intends to make financial exchanges throughout the world seem more real by providing market data feeds. Users searching the GoProfit portal Web site will be able to access delayed quotes for markets located in the Americas, Europe, Africa, Asia and the Pacific Rim. GoProfit will be able to will function as a clearinghouse for delayed quotes, enabling users to track securities trading throughout the world. Along with an English Language site, GoProfit intends to mirror its site to accommodate the following languages: (i) Chinese, (ii) French, (iii) German, (iv) Japanese, and (v) Spanish, Each site's Reuters news and information feeds would apply specifically to the culture each mirror site services (see discussion below regarding Reuters). All mirror sites are planned to receive world-wide market quotes in their primary language. For example, an investor in Japan would be able to follow United States securities in Japanese; an investor in France would be able to follow securities traded on the Hang Seng in Hong Kong in French. GoProfit intends to provide full quote services for most of the established stock exchanges in the world. STRATEGIC PARTNERSHIP AND LICENSING AGREEMENTS. GoProfit has entered into negotiations with Inktomi Corporation (NASDAQ: INKT) to create a proprietary financial search engine and a proprietary directory service. Inktomi is considered by many Internet experts to be the search engine technology on which to build a proprietary search application. The GoProfit creative and technical personnel will work with Inktomi technical support personnel to develop a unique branded look and feel for the GoProfit engine's "Front-End", using Inktomi Data Protocol, to the Inktomi hosted "Back End". The Inktomi's "Back End" clusters resolve the query and deliver the search results to GoProfit's "Front-End" where Internet users interact with the data. GoProfit has entered negotiations with Pair Networks, Inc. (reported to be the Internet's largest privately held company) to provide all of the essential services to host the "Front End" of the GoProfit Web site. pair Networks maintains world class Web hosting facilities under its exclusive control. Pair Networks, Inc. does not provide Web design, marketing, consulting or other value added services. Instead, it focuses only on Web hosting. 5 GoProfit has also entered into negotiations with Reuters (NASDAQ: RTRSY) to provide news service feeds, as well as proprietary financial analytical tools. Reuters would provide GoProfit with delayed quotes from 23 major markets throughout the world. Reuter's proprietary investment tools include news, charts, research, intraday charting, price history, company profiles, daily overviews, options, option chains, income statements, annual balance sheets, quarterly balance sheets, cash flow statements, analysts' reports, earnings estimates, price/earnings ratios, etc. Reuters is reported to be the worlds largest news and television agency with 2,035 journalists, photographers and camera operators in 169 bureaus serving 163 countries. News is gathered and edited for both business and media clients in 25 languages. Approximately 10,000 stories made up of 1.5 to 2 million words are published daily. Some 290 subscribers, plus their networks and affiliates in 93 countries, use Reuters television news coverage. Reuters provides news and information to over 140 Internet sites and reaches an estimated 10.9 million viewers per month, generating approximately 100 million page views via the four major portal sites: Yahoo!, Lycos, Excite and Infoseek. GoProfit recognizes the symbiotic relationship between search keywords and relevant news stories. The keyword search "online brokers" in French, for example, will not only return a listing of broker/dealers who offer trading online, but also French-language Reuters news stories that relate to online trading. GoProfit's strategic partner, Market Guide, provides market data for over 12,000 United States publicly traded companies. Market Guide is considered the most comprehensive financial information source within the United States financial industry. GoProfit continuously updates its research and new companies are frequently added to the data base. GoProfit intends to organize Market Guide's financial information to enable Internet users to search for a company by ticker symbol or company name, to search for a company based on market sector or industry classification, to search for stocks, industries and market sectors that have had the greatest percentage change in price or to search for companies meeting a specific investment criteria determined by an Internet user. GoProfit has purchased an off-the-shelf Web-based e-mail package which will be hosted on pair Networks and administered by GoProfit programmers. GoProfit web designers have customized the look and functionality of these programs in order to brand GoProfit's e-mail service. CONTROL OF GO PROFIT. In view of the options to acquire 6,000,000 shares of common stock of GoProfit held by the independent Board of Directors of GoProfit, it is very possible the Company will become a minority shareholder of GoProfit. This would mean that the Company would not be in control of GoProfit, and that its equity interest in GoProfit would not have a significant impact on the financial condition of the Company. OPERATIONS OF DIAMOND EQUITIES, INC. CORPORATE OPPORTUNITIES. The Company intends to continue to seek corporate opportunities which it finds or which are presented to it by third parties. The Company's principal business objective is to seek long-term growth potential in a business venture rather than to seek immediate, short-term earnings. The Company does not restrict its search to any specific business, industry or geographical location. The Company is presently able to participate only in a limited number of business ventures, due primarily to the Company's limited capital. Lack of additional diversification is a risk in investing in the Company because it may limit the ability of the Company to offset potential losses from one venture against gains from another and will expose the Company to the cyclically and other risks of any business in which it invests. The Company has been seeking and engaging in business opportunities in firms which have recently commenced operations, or are developing companies in need of additional funds for expansion into new products or markets, or are seeking to develop a new product or service, or are established businesses which may be experiencing financial or operating difficulties and are in need of additional capital. In some instances, a business opportunity may involve the 6 acquisition of, or merger with a corporation which does not need substantial additional cash but which desires to be part of a company with an established public trading market for its common stock. The Company may purchase assets and establish wholly- or majority-owned subsidiaries in various businesses or purchase existing businesses as subsidiaries. The Company anticipates that the selection of a business opportunity in which to participate may be complex, such as that of its recent acquisition of GoProfit.com, Inc. However, because of general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, the Company believes that there are other companies seeking even the limited additional capital which the Company has and/or the benefits of a publicly-traded corporation. The perceived benefits of a publicly-traded corporation may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for the principals of a business, creating a means for providing incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all shareholders, estate planning and other factors. Business opportunities may occur in many different industries and at various stages of development, all of which can make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. The Company has limited capital with which to provide the owners of business opportunities with any substantial cash. However, the Company plans to offer owners of business opportunities the possibility of acquiring equity interests in a public company at substantially less cost than is required, for example, to conduct an initial public offering. The owners of the business opportunities could, however, incur significant post-merger or acquisition registration costs if they wish to register a portion of their shares for subsequent sale. The Company will also incur significant legal and accounting costs in connection with the acquisition of a business opportunity including the costs of preparing registration statements and related reports and documents if required, Forms 8-K, acquisition and other agreements. In connection with the acquisition of or merger with another business, the Company may use a portion of its working capital to make short-term (less than one year) loans to a target business. The Company will attempt to assure that the borrower will have the ability to repay the loan within its stated term and that the loan is either fully secured or personally guaranteed, but there can be no assurance in this regard. The Company may make unsecured loans as well as secured loans and, in either event, could lose its entire principal in such a loan. Decisions regarding future acquisitions will be made by management of the Company, which will in all probability act without the consent, vote or approval of the Company's shareholders. The Company presently has no other agreements, understandings or arrangements to acquire or participate in any specific business opportunity. EVALUATION OF OPPORTUNITIES. Analyses of new business acquisitions will be undertaken by or under the supervision of the officers and directors of the Company, none of whom is a professional business analyst. In analyzing prospective business opportunities, management considers such matters as the available technical, financial, and managerial resources; working capital and other financial requirements; history of operation, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of such management; the potential for further research, development, or exploration; specific risk factors not now foreseeable but which then may be anticipated to impact the proposed activities of the Company; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services, or trades; name identification; and other relevant factors. Officers and directors of the Company will meet personally with management and key personnel of the target business as part of their investigation. To the extent possible, the Company intends to utilize written reports and personal investigation to evaluate the above factors. The Company may allocate a minor portion of its working capital for the retention of outside consultants, if the Board deems it necessary, to aid in the analysis of a business opportunity. 7 Since the Company is subject to Section 13 of the Exchange Act, it will be required to furnish certain information about significant acquisitions, including audited financial statements for the company(s) acquired, covering one, two or three years depending upon the relative size of the acquisition. Consequently, acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable. Any venture in which the Company participates presents certain risks. Many of these risks cannot be adequately identified prior to selection of the specific opportunity, and the Company must, therefore, depend on the ability of management to identify and evaluate such risks. Certain opportunities available to the Company may have been unable to develop a going concern or may be in development stage in that they have not generated significant revenues from their principal business activities prior to the Company's participation. In such cases, the combined enterprises may not become going concerns or advance beyond the development stage even after the Company's participation in the activity and the related expenditure of the Company's findings. Many of the opportunities may involve new and untested products, processes, or market strategies which may not succeed. Further, market and industry conditions are subject to change. Such risks have been and will be assumed by the Company and, therefore, its shareholders. The Company does not restrict its search to any specific kind of firms, but may acquire a venture which is in any stage of its corporate life, including, but not limited to, companies in the development stage and those already in operation. It is impossible to predict at this time the status or maturity of any business in which the Company may further become engaged through acquisition or otherwise. The results of the Company's past acquisitions are reflected in the Company's combined financial statements and in Item 6, "Management's Discussion and Analysis or Plan of Operation). FUTURE ACQUISITIONS. In acquiring a particular business, the Company may become party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. It may also purchase the stock or assets of an existing business. On the consummation of a transaction, it is possible that the present management and shareholders of the Company will not be in control of the Company. In addition, a majority or all of the Company's directors may, as part of the terms of the acquisition transaction, resign and be replaced by new directors without a vote of the Company's shareholders. It is anticipated that any securities issued in any such reorganization would be issued in reliance on exemptions from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of this transaction, the Company may agree to register such securities either at the time the transaction is consummated, under certain conditions, or at specified times thereafter. The issuance of substantial additional securities and their potential sale into any trading market which may develop in the Company's Common Stock may adversely affect the market for such securities. While the actual terms of a transaction to which the Company may be a party cannot be predicted, it is expected that the parties to the business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition in a "tax free" reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code of 1954, as amended (the "Code"). In order to obtain tax free treatment under the Code, it may be necessary for the owners of the acquired business to own 80% or more of all classes of stock of the surviving entity. In such event, the shareholders of the Company, would retain less than 20% of the issued and outstanding shares of the surviving entity, which could result in significant dilution in the percent ownership of such shareholders. As part of the Company's investigation, officers and directors of the Company may meet with management and key personnel of a target company, may visit and inspect facilities, obtain independent analysis or verification of certain information provided by such Company, check references of management and key personnel, and take other reasonable investigative measures, to the extent that the Company's limited financial resources and management expertise allow. 8 The manner in which the Company participates in an opportunity will depend on the nature of the opportunity, the respective needs and desires of the Company and other parties, the management of the target company, and the relative negotiating strength of the Company and such other management. With respect to any mergers or acquisitions, negotiations with target company management will be expected to focus on the percentage of the Company which target company shareholders would acquire in exchange for their shareholdings in the target company. Depending upon, among other things, the target company's assets and liabilities, the Company's shareholders will, in all likelihood, hold a lesser percentage ownership interest in the Company following any merger or acquisition. Such dilution of ownership interest may be significant in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company's shareholders, including those shareholders who continue their investment. It is probable that the Company will not have sufficient working capital to undertake any significant development, marketing, or manufacturing for any company which may be acquired. Accordingly, following the acquisition of any such company, the Company may be required to either seek additional debt or equity financing or obtain funding from third parties, in exchange for which the Company may be required to give up a substantial portion of its interest in the acquired company. There can be no assurance that the Company will be able to obtain additional financing or to interest third parties in providing funding for the further development of any companies acquired. The Company will participate in a business opportunity only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require specific representations and warranties by all of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties prior to such closing, will outline the manner of bearing costs if the transaction is not closed, will set forth remedies on default, and will include other terms typical in transactions of such nature. It is anticipated that the investigation of specific business opportunities and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, and others,. If a decision is made not to participate in a specific business opportunity, the costs incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred. As is customary in the industry, the Company may pay a finder's fee for locating a merger or acquisition candidate and for location of additional financing. If any such fee is paid, it will be approved by the Company's board of directors and will be in accordance with industry standards. This type of fee would not be paid to any employee, officer, director or a 5% or more shareholder of the Company. FORWARD-LOOKING STATEMENTS. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created thereby. Actual results could differ materially because of the following uncertain factors: the inability to make additional acquisitions; the probability of losses due to its new line of business; the continued employment of key management; a change in control of the Company. COMPETITION. In terms of making other acquisitions, the Company is a minor participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns which have significantly greater financial and personnel resources and technical expertise than the Company. In view of the Company's limited financial resources, the Company will continue to be at a significant competitive disadvantage compared to the Company's competitors in making desirable 9 acquisitions. Also, the Company may be competing with other small, blind-pool, public companies located in the Southwest and elsewhere. REGULATION. The Company might, in certain circumstances, be deemed to be an investment company under the provisions of Section 3(a)(3) of the 1940 Act, which could have substantial adverse impact on its operations. This could occur if a significant proportion of its working capital were invested in short-term debt instruments for longer than a one-year period and the Company had no significant operations. The Company has, and intends to take all reasonable steps to avoid such classification in the future. Mergers or acquisitions of the Company are structured in such a manner as to minimize federal and state tax consequences to the Company and the target company. Management of the Company also reviews any mergers or acquisitions in an effort to minimize the possibility that any merger or acquisition will be classified as a taxable event by the Internal Revenue Service. EMPLOYEES. The Company presently has two (2) employees, all engaged in management and administrative functions. The Company also engages, from time to time, services of outside consultants to assist it in evaluation of prospective target companies. The Company may allocate a minor portion of its working capital for part-time secretarial services required by the Company. The Company's subsidiary, Precision, has ten (10) non-union employees and six (6) machinists. One (1) is a shift supervisor, one (1) is a quality assurance inspectors, one (1) handles shipping and receiving, and one (1) is engaged in office and clerical duties. The Company's other subsidiary, GoProfit.com, Inc. presently has four (4) employees, including its management personnel. It anticipates hiring additional employees when capital is available. ITEM 2. DESCRIPTION OF PROPERTY. The Company presently operates in the offices of its subsidiary, Precision, which leases 15,000 square feet of space at 216 South Alma School Road, Mesa, Arizona 85210, of which 13,000 square feet are used for production and 2,000 square feet for offices. The space is rented at $6,750 per month. The offices of GoProfit.com, Inc., the Company's other subsidiary, are located at 10490 Wilshire Blvd, Suite 1605, Las Angeles, CA, 90024. GoProfit pays $2,250 per month rental and has made a $4,500 lease deposit. The lease expires March 31, 2001. ITEM 3. LEGAL PROCEEDINGS. Neither the Company nor any of its subsidiaries is a party to any material pending legal proceedings or government actions (except as set forth below), including any material bankruptcy, receivership, or similar proceedings. Except as set forth below, management of the Company does not believe that there are any material proceedings to which any officer or affiliate of the Company, any owner of record of beneficially of more than 5% of the Common Stock of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. On November 6, 1996, a true bill was returned by a Grand Jury in the United States District Court in Nevada against certain former directors and officers of the Company and other non-affiliated individuals, who were accused of racketeering, RICO violations, securities fraud and wire fraud. All of the charges against the former directors and officers arose out of alleged activities the individuals undertook while serving as directors and officers of the Company. The Company is not a party of and was not named as a defendant in the indictments. However, because the indictments relate to activities alleged to have been perpetrated by then officers and directors of the Company, there can be no assurance that the indictments ultimately will not have a material adverse effect on the Company. The persons named in the indictments as disclosed in prior 10-KSB filings, are no longer officers, directors or control persons of the Company. 10 The government informed the Company on August 21, 1996 that Mr. and Mrs. Westfere, the Company's then current Chief Executive Officer and Secretary/Treasurer, were neither subjects or targets of the grand jury investigation, and the government did not contact any other then current officers or employees concerning the investigation. The government has never informed the Company as to the relief, if any, to be sought. The Company complied with the subpoena DUCES TECUM (to produce Company records and documents) it received and cooperated with the government's investigation. The Company is presently unable to assess the potential liability, if any, to the Company as a result of activities which are the subject of the above investigation. There has been no final resolution of this matter as of the date of this filing. BREACH OF CONTRACT LITIGATION. In connection with the sale of its pay-telephone operations, the Company received a promissory note in the principal sum of $811,250. Monthly payments of $14,000 on the note were to commence on February 15, 1997. No payments on the note have been received. In March, 1999, a complaint for breach of contract was filed with the Eighth Judicial District Court of Clark County, Nevada. The complaint alleges of an anticipatory breach by the defendant, Tru-Tel Communications, LLC, issuer of the promissory note. The complaint also names as party defendants, the principals of Tru-Tel Communications, LLC and Finova Capital Corporation (provider of the financing used to purchase the assets.) The lawsuit was settled pursuant to a Settlement and Release Agreement on or about March 23, 1999, filed with the Court, wherein Tru-Tel and the other named defendants (Finova was dismissed) agreed to pay Four Hundred Fifty Thousand Dollars ($450,000), of which One Hundred Thousand was paid in April, 1999, and the balance is payable quarterly in payments of $21,874.98. Tru-Tel has since filed for bankruptcy, and it may be likely that the Company may not receive the full payment settled upon. INVESTIGATION OF SHAREHOLDER. The State of Florida's Department of Banking and Finance is currently reviewing the ownership of securities of the Company by Derby Holdings Group, Ltd. (See Items 5 and 11). The review is confidential and is not construed as an indication of a violation on the part of the Company or any other person or entity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted during the fiscal year ended June 30, 1998, to a vote of the Company's security holders. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is currently traded in the over-the-counter market and is quoted by the National Quotation Bureau as a non-NASDAQ OTC security. According to information provided to the Company, during the fiscal year ended June 30, 1999, 21,455,700 shares of the Company's Common Stock were traded on the Bulletin Board. Nonetheless, the Company therefore believes that there is no well established public trading market for the Company's Common Stock. The Company also believes that there are only five market makers which currently make a market in the Company's Common Stock. These quotations reflect inter-dealer reported bid prices, and may or may not necessarily represent actual transactions. Quarter High Low ------- ------ ------- FISCAL YEAR ENDED First $ .1875 $0.50 JUNE 30, 1998 Second $ 0.16 $0.0625 Third $ 0.08 $0.0325 Fourth $ 0.51 $0.0325 FISCAL YEAR ENDED First $ 0.55 $0.045 JUNE 30, 1999 Second $ 0.22 $ 0.06 Third $ 1.50 $ 0.07 Fourth $6.03125 $ 0.75 11 As of September 30, 1999, there were approximately 702 holders of record of the Company's Common Stock as reported to the Company by its transfer agent. No cash dividends have been declared or paid to date on the Company's Common Stock. RELATED STOCKHOLDER MATTERS. The Registrant previously had 727 shares of Series A 6% Preferred Stock outstanding, with $194,023 in accrued but unpaid dividends. On October 28, 1997 the Registrant entered into an agreement with Dingaan Holdings, S.A., the sole shareholders of the Series A Preferred Stock, to exchange these shares and the accrued dividends for 18,000 shares of new Series B Preferred Stock. The Series B Preferred Stock carries no dividend and is convertible to 18,000,000 shares of common stock of the Registrant. The following is a summary of securities transactions which took place during 1999, involving the Company and certain of the above shareholders, which may be considered affiliates. Of the eighteen thousand (18,000) shares of Series B convertible preferred stock held by Dingaan Holdings, SA ("Dingaan"), an affiliate. Dingaan transferred two thousand seven hundred (2,700) shares to Derby Holdings Group, Limited ("Derby"). Subsequently, Derby advised the Company that it was authorized by Dingaan Holdings, S.A. ("Dingaan") to convert shares of the Company's Class B Preferred Stock held by Dingaan to common stock of the Company, the certificates for which to be issued to Derby. From March 9, 1999 to July 12, 1999, such transactions were made, and Derby was issued a total of Two Million Seven Hundred Thousand (2,700,000) shares of the Company's common stock. The Company issued one hundred (100) shares of Series B Convertible Preferred Stock to Hanes Development, Ltd., a British Virgin Islands corporation, in connection with the Company's acquisition of GoProfit.Com, Inc. The Company also issued six hundred thousand (600,000) shares of restricted common stock to principals of GoProfit.Com, Inc., in connection with the GoProfit.Com, Inc. acquisition. On March 9, 1999, the Company sold in a private transaction, fifty (50) shares of its Class A 6% Preferred Stock to Derby Holdings Groups, Limited, ("Derby"), at a price of One Thousand Dollars, ($1,000) each, for a total purchase price of $50,000. Also, on June 11, 1999 the Company sold an additional 200 shares of its Class A 6% Preferred Stock, at a price of One Thousand Dollars ($1,000) per share, for a total purchase price of Two Hundred Thousand Dollars ($200,000). ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998. On November 15, 1996, the Company sold its payphone base and all related equipment, contracts, automobiles and nearly all furniture &fixtures to Tru-Tel Communications, L.L.C. for $1,711,250 in cash and a note receivable of $811,250. The Company assigned the office and warehouse lease to the buyer and moved its operations to another location in Tempe, Arizona. Since November, 1996, the Company has been winding down operations relative to the payphone business and has been involved in searching for new business ventures through June 15, 1998 when it acquired Premier Plastics, Inc. a plastic injection molding business in Tempe, Arizona. In July 1998 the Company acquired the assets and operations of Accurate Thermoplastics, Inc., a plastics injection molding company in Mesa, Arizona. In April 1999, the Company acquired all of the common stock of GoProfit.com, Inc., a development stage company in the process of developing an internet web site and financial search engine. Because the Company had only minimal operations in the plastics industry in fiscal year 1998, the results of operations will differ from that of fiscal year 1999, which includes the operating activity of both plastics companies for a full year and GoProfit.com expenses from April through June 1999. 12 The Company had a net loss of ($626,210) in the fiscal year ended June 30, 1999 as compared to a net loss of ($769,923) in the fiscal year ended June 30, 1998. The difference in net loss in the year ended June 30, 1999 versus 1998 is largely due to the change in operations to the plastics industry. The net loss from continuing operations for the fiscal year 1999 was ($751,422), as compared to ($739,624) for the fiscal 1998. Though the difference isn't significant in the aggregate, there were material changes in operating activities. Diamond, the parent company, has losses of ($296,751), a $40,000 improvement from last year when eliminating the $400,000 bad debt on the Tru-Tel note. Precision Plastics had losses of ($240,340) in 1999 verses a slight loss in 1998 from the two weeks of operations. GoProfit had losses from operations in the amount of ($214,331), for the three months of operations included in the consolidated company. Interest income decreased to $35,919 in fiscal 1999 as compared to $53,179 in the fiscal year ended June 30, 1998, due to diminishing cash balances. The Plastics operations generated revenues of $1,367,610 during 1999 as compared to 0 for fiscal 1998. The Company's selling, general and administrative expenses increased by 255% to $904,706 for the fiscal year 1999 as compared to $355,100 for the fiscal year ended June 30, 1998. The increase is due to the change of operations to three independent companies versus one in 1998. General and administrative expenses for fiscal 1999 are broken down as follows: Diamond Equities ($291,924), Precision Plastics ($490,641), and GoProfit.com ($122,141), for a total of ($904,706). The Company's future result of operations may be materially affected due to the recent acquisition into the internet industry. The plastics operations will continue at operate at approximately the same level in fiscal 2000. The Company anticipates that in the fiscal year ending June 30, 2000, that the operations in the plastics industry will be expanded with additional acquisitions and growth. THE FOREGOING IS A FORWARD-LOOKING STATEMENT WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS SUBJECT TO THE SAFE HARBORS CREATED THEREBY. ACTUAL RESULTS COULD DIFFER MATERIALLY BECAUSE OF THE FOLLOWING FACTORS: LOSSES DUE TO AN UNPROFITABLE NEW LINE OF BUSINESS; THE CONTINUED EMPLOYMENT OF KEY MANAGEMENT; A CHANGE IN CONTROL OF THE COMPANY DUE TO THE CONVERSION BY DINGAAN HOLDINGS, S.A. OF ITS SERIES B PREFERRED STOCK OR OTHER EVENTS. LIQUIDITY AND CAPITAL RESOURCES. The Company requires capital to support its new operations and general and administrative expenses of the Company in its search for viable acquisitions. The Company requires capital to support the injection molding operations and general and administrative expenses of the parent company, as it searches for viable acquisitions, and overseas the investments in its subsidiaries. At June 30, 1999, the Company had cash and cash equivalents of $210,035 compared to cash and cash equivalents of $600,231 at June 30, 1998. This decrease of $390,196 resulted from the purchases of property and equipment in the amount of $371,294, the purchase of investments and notes receivable of $656,000 and the use of cash in operations of $525,900. The Company cashed the CD which increased the cash position $500,000. The Company also raised $350,000 from the issuance of it's Series A, 6% cumulative preferred stock. The funding sources currently available to the Company include potential public or private offerings and additional issuances of the Series A preferred stock to private investors. The Company has current plans to raise additional funds in its subsidiary Precision Plastics through private placements of its common stock or preferred stock to assist with the capital requirements of additional acquisitions and to consolidate debt. There are however no third party financing arrangements in place at this time. Therefore, the Company's sole source of operating capital for the foreseeable future is likely to be from current cash reserves and collection on the notes receivable. 13 Principal uses of working capital will include payment of the Company's general and administrative expenses and the payment of notes associated with the purchase of assets by Precision. There is currently no requirement to pay accrued and unpaid dividends on its previously outstanding shares of Series S 6% Preferred Stock and no dividends are payable on its Series B Preferred Stock. The Company has accrued dividends to the new Series A Preferred shareholders in the amount of $2,751, which were paid subsequent to the year end. The Company believes that its existing cash balances and net cash flows from operations (if any) will be sufficient to meet the Company's cash requirements for the next 12 months. However, the foregoing and the Company's ability to operate profitably are subject to material uncertainties. See Item 6 "Results of Operations for the Fiscal Years Ended June 30, 1999 and 1998". ITEM 7. FINANCIAL STATEMENTS. The following financial statements are attached hereto and incorporated herein: Heading Page ------- ---- Independent Auditor's Report F-1 Predecessor Independent Auditor Report F-2 Balance Sheets for the Years Ended June 30, 1998 and 1997 F-3 Statements of Operations for the Years Ended June 30, 1998 and 1997 F-4 Statements of Stockholder's Equity for the years ended June 30, 1998, 1997 and 1996 F-5 Statements of Cash Flows for the years ended June 30, 1998, 1997 and 1996 F-6 Notes to Financial Statements F-8 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. As reported on Form 8-K dated July 17, 1998, the Company changed accountants, without any disagreement or adverse opinion or disclaimer. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. GENERAL. The following information is provided for each of the executive officers and directors of the Company: DAVID WESTFERE, 33, has been a Director, President and Chief Executive and Operating Officer of the Company since April 6, 1995, and was General Manager of Operations from January 1991 to April 1995. He also acts as president of Precision Plastics, Inc., a subsidiary of the Company. Mr. Westfere presently works part time for the Company, and is also presently the owner-operator of a towing service company. From 1988 until 1990 he was the route supervisor for the Company's pay telephone operation in Bakersfield, California, and from 1990 until 1991 he was the route supervisor of the Company's pay telephone operation in Phoenix, Arizona. From September 1984 to June 1987 Mr. Westfere attended the University of Akron. TODD D. CHISHOLM, 37, has been a Director of the Company since June 27, 1995. From June 1990 until September 1992 he was employed as a staff accountant by Orton & Company, Certified Public Accountants, and from September 1992 until June 1994 he was employed as audit manager by Jones, Jensen, Orton & Company, 14 Certified Public Accountants. Since June 1994 he has been self-employed as a certified public accountant. Since April 1995 he has also been the vice-president and chief financial officer of The Solarium, Inc., a privately held travel and tanning center. Mr. Chisholm received a bachelor of arts degree in business from the University of Utah. He has been a certified public accountant since 1992. The Registrant also employs Mr. Chisholm as it's CFO and Secretary/Treasurer. Mr. Chisholm, performs accounting services for the Registrant for which he is paid a flat fee of $920 per month for compilation and payroll services and is paid an hourly fee for any additional work. It is believed that the terms of the arrangement between Mr. Chisholm and the Registrant are at least as favorable as terms that could be obtained with a non-affiliated party. ITEM 10. EXECUTIVE COMPENSATION. The following table set forth the aggregate executive compensation earned by or paid to current management of the Company for the fiscal year ended June 30, 1999, 1998 and 1997. Annual Compensation ------------------- Other Annual Name and Principal Positions Year Salary Bonus Compensation - ---------------------------- ---- ------ ----- ------------ David Westfere, President (1) 1999 $38,400 $10,000 $ 19,994 1998 $36,800 $ 0.00 $ 51,787 (2) 1997 $36,800 $ 0.00 $42,429.81 (3) Todd D. Chisholm 1999 $ 0.00 $10,000 $ 0.00 1998 $ 0.00 $ 0.00 $ 0.00 1997 $ 0.00 $ 0.00 $ 0.00 (1) The Company did not pay any long-term compensation to Mr. Westfere during the above periods. (2) During the fiscal year 1999, the Company paid (i) health insurance premiums of approximately $6,000 and (ii), $33,000 to C&N, Inc., a company controlled by Mr. Westfere, for management services. See "Item 12 -- Certain Relationships and Related Transactions. (3) The Company paid health insurance premiums of $5,920 for Mr. Westfere and his family during the fiscal year 1998. The Company also paid a total of $36,000 to C&N, Inc., a company controlled by Mr. Westfere, for management services during such period. (4) During the fiscal year 1997, the Company paid health insurance premiums for Mr. Westfere and his family of $6,429.91 and $36,000 to C&N, Inc., a corporation controlled by Mr. Westfere. No executive officer of the Company received compensation exceeding $100,000 for the fiscal years ended June 1999, 1998, 1997. COMPENSATION OF DIRECTORS. Directors are permitted to receive fixed fees and other compensation for their services as directors, as determined by the Board of Directors. No such fees were paid to the Company's directors for the fiscal year 1998. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information concerning the Common Stock ownership as of June 30, 1998, of (i) each person who is known to the Company to be the beneficial owner of more than five percent of the Company's Common Stock; (ii) all directors; (iii) each of the Company's executive officers; and (iv) directors and executive officers of the Company as a group: 15 Name and Address of Amount and Nature of Beneficial Owner Beneficial Ownership ---------------- -------------------- Oak Holdings, Inc. 2,500,000 (1) Apartado 63685 Panama, Republic of Panama Cede & Co. 3,433,162 (2) P.O. Box 222 Bowling Green Station New York, New York 10274 Todd D. Chisholm 15,000 50 West Broadway Suite 1130 Salt Lake City, Utah 84101 David Westfere -0- 105 E. Ellis Drive Tempe, AZ 85282 Directors and Executive Officers 15,000 as a Group (2 persons) (1) These shares are held and of record by Oak Holdings, Inc., Grafton Holdings, S.A. ("Grafton") has indicated that it has direct beneficial ownership of such shares. However, the Company believes that Grafton has indirect ownership of such shares as the sole corporate director of Oak Holdings, Inc.. As the sole corporate director of Oak Holdings, Inc., Grafton has represented to the Company that it is responsible for the management of Oak Holdings, Inc. Mr. Baily has indicated to the Company that he has indirect beneficial ownership of such shares by virtue of being a controlling shareholder of Oak Holdings, Inc. with Pedro Coronado. (2) Represents shares held for the benefit of individual shareholders in the "street name" of Cede & Co., an entity which exists to perform that function. The above table and footnotes reflects the removal of certain entities which no longer own 5% or more of the outstanding Common Stock. As of September 24, 1999, the Company had outstanding 15,300 shares of Series B Preferred Stock, all of which shares were owned of record by Dingaan Holdings, S.A.. and 100 shares held by Hanes Development, Ltd. There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change of control of the Company. However, if at any time Dingaan should elect to convert its shares of Series B Preferred Stock into shares of Common Stock, control of the Company would change to that entity upon such conversion. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Mr. Chisholm, a director of the Company, performs accounting services for the Company. He is paid a flat fee of $920 per month for compilation and payroll services and is paid an hourly fee for any additional work. It is believed that the terms of the arrangement are at least as favorable as the terms that could be obtained with a non-affiliated party. 16 CERTAIN TRANSACTIONS. On May 1, 1999, the Company loaned two hundred thousand dollars ($200,000) to C&N, Inc., a company controlled by David Westfere. As consideration for making the loan, C&N, Inc gave up it's rights to payments from the Company to C&N, Inc for it's management services. The loan was fully repaid to the Company on July 15, 1999. The Company has no equity ownership either in C&N, Inc. or in affiliates of C&N, Inc. ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K. (a) The following exhibits are furnished with this Report pursuant to Item 601 of Regulation SB-2. Exhibit No. Description of Exhibit Page - ----------- ---------------------- ---- 3 (i) Articles of Incorporation as amended * 3 (ii) Bylaws of the Company, as currently in effect * 3 (iii) Certificate regarding Series A 6% Preferred Stock *** 3 (iv) Certificate of Amendment of Articles of Incorporation, dated June 20, 1997 *** 3 (v) Articles of Incorporation - Precision Plastics Molding, Inc. *3 3 (vi) Bylaws - Precision Plastics Molding, Inc. *3 4 (a) Form of certificate evidencing shares of Common Stock * 4 (b) Form of certificate evidencing shares of Series A 6% Preferred Stock *** 10.1 Assignment and Assumption of Liabilities Agreement ** 10.2 Stock Purchase Agreement dated April 3, 1995 between Oak Holdings and Teletek, Inc. **** 10.3 Consulting Agreement dated April 6, 1995, between the Company and Michael Swan **** 10.4 Consulting Agreement dated January 1, 1995, between the Company and C&N, Inc. *** 10.5 Severance Agreement dated October 3, 1996 between the Company and Michael Swan *2 10.6 Form 12b-25 dated September 27, 1997 ***** 10.7 Stock Purchase Agreement between Teletek, Inc. and Dingaan Holdings, S.A. dated December 1, 1996 (change in control of registrant) ****** 10.8 Asset Purchase Agreement between the Company, Precision and Premier Plastics Corp, dated June 15, 1998. *3 10.9 Asset Purchase Agreement between the Company, Precision and Accurate Thermoplastics, Inc., dated July 15, 1998 *3 17 10.10 Preferred Stock Exchange Agreement Dingaan/DEI *3 10.11 Stock Purchase Agreement - GoProfit.Com, Inc. E-1 10.12 Correction Agreement - GoProfit.Com, Inc. E-2 Incorporated 10.13 Form 12b-25 -- Filed 9-28-99 by reference 27 Financial Data Schedule - ---------- * Incorporated by reference to the exhibits with the Company's registration statement on Form 10-SB (Commission File No. 0-24138) filed with the Securities and Exchange Commission on May 13, 1994. ** Incorporated by reference to the exhibits filed with the Company's 1994 annual report on Form 10-KSB (Commission File No. 0-24138) filed with the Securities and Exchange Commission on October 13, 1994. *** Incorporated by reference to the exhibits filed with the Company's registration statement on Form SB-2 (Commission File No. 33-85884). **** Incorporated by reference to the exhibits filed with the Company's Current Report on form 8-K (Commission File No. 0-24138) filed with the Securities and Exchange Commission on December 1, 1996. ***** Incorporated by reference to the Company's Form 12b-25 dated September 27, 1997. ****** Incorporated by reference to the Company's Report on Form 8-K (Commission File No. 0-24138) filed with the Securities and Exchange Commission on March 15, 1997. *2 Incorporated by reference to the exhibits filed with the Company's 1996 Annual Report on Form 10-KSB (Commission file No. 0-24138) filed with the Securities and Exchange Commission on October 11, 1996. *3 Incorporated by reference to the exhibits filed with the Company's Form 10-KSB filed with the Commission on September 28, 1998. 18 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIAMOND EQUITIES, INC. - ---------------------- Registrant By: /s/ David D. Westfere ---------------------------- David D. Westfere, President Date: October 12, 1999 By: /s/ Todd D. Chisholm ---------------------------- Todd D. Chisholm, Chief Financial Officer Date: October 12, 1999 19 FORM 10-KSB DIAMOND EQUITIES, INC. FINANCIAL STATEMENTS Independent Auditor's Report............................................... F-1 Balance Sheets for the Years Ended June 30, 1998 and 1997.................. F-2 Statements of Operations for the Years Ended June 30, 1998 and 1997........ F-5 Statements of Stockholder's Equity for the years ended June 30, 1998, 1997 and 1996................................................................... F-7 Statements of Cash Flows for the years ended June 30, 1998, 1997 and 1996.. F-8 Notes to Financial Statements.............................................. F-9 19 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Diamond Equities, Inc.: We have audited the accompanying consolidated balance sheet of Diamond Equities, Inc. and subsidiaries (the "Company"), as of June 30, 1999 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the two years in the period ended June 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Diamond Equities, Inc. at June 30, 1999 and the consolidated results of their operations and their cash flows for each of the two years in the period ended June 30, 1999, in conformity with generally accepted accounting principles. KING, WEBER & ASSOCIATES, P.C. Tempe, Arizona September 16, 1999 F-1 DIAMOND EQUITIES, INC. CONSOLIDATED BALANCE SHEET JUNE 30, 1999 - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 210,035 Accounts receivable (net of allowance of $13,606) 199,338 Notes receivable - current portion 274,535 Other receivable 205,000 Interest receivable 15,939 Inventories 184,143 Prepaid expenses 37,744 ----------- Total current assets 1,126,734 PROPERTY, MACHINERY AND EQUIPMENT, net 1,535,717 OTHER ASSETS 147,963 NOTES RECEIVABLE - noncurrent portion 224,388 ----------- TOTAL ASSETS $ 3,034,802 =========== LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 330,329 Accrued liabilities 62,409 Preferred stock dividends payable 196,774 Customer deposits 8,809 Capital lease obligations - current portion 33,435 Notes payable - current portion 165,007 ----------- Total current liabilities 796,763 CAPITAL LEASE OBLIGATIONS - LONG-TERM PORTION 4,378 NOTES PAYABLE - LONG-TERM PORTION 114,787 ----------- Total liabilities 915,928 ----------- MINORITY INTEREST 241,203 ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred Series A 6%, $0.001 par value, convertible, 18,000 shares authorized, 350 issued and outstanding, liquidation preference of $350,000 1 Preferred Series B, convertible, 18,000 shares authorized, 15,900 issued and outstanding 1,605,540 Common stock, $0.001 par value, 50,000,000 shares authorized, 7,366,099 issued and outstanding 7,366 Paid in capital 4,130,066 Accumulated deficit (3,865,302) ----------- Total stockholders' equity 1,877,671 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,034,802 =========== The accompanying notes are an integral part of these consolidated financial statements. F-2 DIAMOND EQUITIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998 - -------------------------------------------------------------------------------- 1999 1998 ----------- ----------- NET SALES $ 1,368,510 $ COST OF SALES 1,063,840 ----------- ----------- Gross Profit 304,670 0 ----------- ----------- OPERATING EXPENSES Salaries expense 370,259 117,217 General and administrative expenses 534,447 237,883 Selling expenses 103,627 ----------- ----------- Total 1,008,333 355,100 ----------- ----------- Operating loss (703,663) (355,100) OTHER (INCOME) AND EXPENSES Allowance for note and related account receivable 441,213 Interest income (35,919) (53,179) Interest expense 63,665 2,849 Loss on legal settlement 22,452 Loss on sale of assets 12,861 Other income (15,300) (6,359) ----------- ----------- Total other expense 47,759 384,524 ----------- ----------- LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM (751,422) (739,624) MINORITY INTEREST 76,588 5,114 ----------- ----------- LOSS FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM (674,834) (734,510) EXTRAORDINARY ITEM: Debt forgiveness income 48,624 ----------- ----------- LOSS FROM CONTINUING OPERATIONS (626,210) (734,510) DISCONTINUED OPERATIONS Loss from discontinued operations -- (35,413) ----------- ----------- NET LOSS $ (626,210) $ (769,923) =========== =========== BASIC NET LOSS PER COMMON SHARE Continuing operations before extraordinary item $ (0.13) $ (0.16) Extraordinary item 0.01 -- ----------- ----------- Total - continuing operations (0.12) (0.16) Discontinued operations -- (0.01) ----------- ----------- Total $ (0.12) $ (0.17) =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,161,715 4,666,099 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. F-3 DIAMOND EQUITIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND 1998 - --------------------------------------------------------------------------------
PREFERRED STOCK ------------------------------------ COMMON STOCK SERIES A SERIES B ----------------- ADDITIONAL --------------- ------------------ ACCUMULATED SHARES AMOUNT PAID-IN SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL ------ ------ ------- ------ ------ ------ ------ ------- ----- BALANCE JULY 1, 1997 4,666,099 $4,666 $ 2,582,282 18,000 $1,817,591 $(2,465,790) $1,938,749 Net loss (769,923) (769,923) --------- ------ ----------- ------ ------ ------ ---------- ----------- ---------- BALANCE JUNE 30,1998 4,666,099 4,666 2,582,282 18,000 1,817,591 (3,235,713) 1,168,826 Conversion of Series B 2,100,000 2,100 209,951 (2,100) (212,051) 0 Stock issued for acquisition 600,000 600 359,400 360,000 Issuance of Series A 349,999 350 $ 1 350,000 Stock issued by subsidiary 628,434 628,434 Preferred dividends (3,379) (3,379) Net loss (626,210) (626,210) --------- ------ ----------- ------ ------ ------ ---------- ----------- ---------- BALANCE JUNE 30, 1999 7,366,099 $7,366 $ 4,130,066 350 $ 1 15,900 $1,605,540 $(3,865,302) $1,877,671 ========= ====== =========== ====== ====== ====== ========== =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-4 DIAMOND EQUITIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998 - -------------------------------------------------------------------------------- 1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (626,210) $ (769,923) Adjustments to reconcile net loss to net cash used in operating activities of continuing operations: Undistributed minority interest (76,588) (5,114) Loss from discontinued operations 35,413 Depreciation and amortization 220,826 8,458 Allowance on note and accounts receivable 441,213 Forgiveness of debt (48,624) Loss on disposal of equipment (12,861) 1,425 Loss on legal settlement 22,452 Notes receivable forgiven as compensation for services 20,000 Changes in assets and liabilities (net of acquisitions): Accounts receivable 37,160 (9,697) Interest receivable (14,355) 316 Inventories (95,175) (5,400) Prepaid expenses (32,633) (5,111) Other assets (24,950) (6,000) Accounts payable 42,236 (8,068) Accrued liabilities 53,936 (99,250) Customer deposits 8,809 ---------- ---------- Net cash flows used in continuing operating activities (525,977) (421,738) Net cash flows used in discontinued operations (123,511) ---------- ---------- Net cash used in operating activities (525,977) (545,249) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, machinery and equipment (371,294) (8,345) Cash loaned for notes receivable (209,800) (35,750) Payments received on notes receivable 109,800 Redemption (purchase) of certificates of deposit 505,404 (505,404) Purchase of business assets net of cash acquired (346,429) (80,000) Proceeds on liquidation of other assets 42,987 Cash committed and paid under investment agreement (100,000) (60,000) ---------- ---------- Net cash used in investing activities (369,332) (689,499) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on lines of credit (250,200) 250,200 Payments on notes payable (110,885) Issuance of Preferred Series A 6% Cumulative stock 350,000 Proceeds from stock issued by subsidiary 618,250 Payment of dividends (628) Principal payments on capital leases (101,424) (2,204) ---------- ---------- Net cash provided by financing activities 505,113 247,996 ---------- ---------- DECREASE IN CASH (390,196) (986,752) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 600,231 1,586,983 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 210,035 $ 600,231 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. F-5 DIAMOND EQUITIES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 1999 AND 1998 - -------------------------------------------------------------------------------- 1999 1998 -------- -------- SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 59,521 $ 1,634 ======== ======== Income taxes paid $ 800 $ 11,840 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: 1999 Accounts payable assumed in asset purchase $176,859 ======== Capital leases assumed in asset purchase $185,733 ======== Note payable assumed in asset purchase $ 94,639 ======== Notes payable issued in asset purchase $390,679 ======== Equipment acquired under capital lease $ 8,097 ======== Value of common stock issued in asset purchase $360,000 ======== Accounts receivable offset against note payable Balance forgiven $ 46,015 ======== Note payable forgiven $ 94,639 ======== Equipment returned to lessor (net of depreciation of $21,034) $ 98,966 ======== Capital lease obligation settled by equipment return $ 86,105 ======== Forgiveness of officer receivables and interest $ 20,000 ======== 1998 Accounts payable assumed in asset purchase $ 6,490 ======== Capital leases assumed in asset purchase $ 33,716 ======== Value of subsidiary common stock issued in asset purchase $ 75,000 ======== The accompanying notes are an integral part of these consolidated financial statements. F-6 DIAMOND EQUITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 1999 AND 1998 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts and activity of Diamond Equities, Inc. and its majority owned subsidiaries Precision Plastics Molding, Inc. and GoProfit.com, Inc. (the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. The Company was previously in the business of locating sites and installing pay telephone equipment. The Company would pay commissions to the owners of the sites where its equipment was located and earned its revenue based on pay telephone charges to customers. On November 15, 1996, the Company sold all of its pay-telephone assets, its only business segment, to Tru-Tel Communications, LLC. The discontinued operations were located in the southwestern United States. The Company changed its name to Diamond Equities, Inc. on June 20, 1997 and has since been seeking acquisition targets. On June 15, 1998 the Company's wholly owned subsidiary, Precision Plastics Molding, Inc. ("Precision"), purchased the assets of a plastic injection molding business. Operations of Precision are included for the period June 15, 1998 through June 30, 1998 in the accompanying statement of operations for the year ended June 30, 1998. On July 20, 1998 Precision purchased the assets of a second plastic injection molding business. The new businesses are located in Arizona and business is generated in the southwestern United States. On April 5, 1999, the Company acquired all of the common stock of GoProfit.com, Inc. ("GoProfit"). GoProfit is a development stage enterprise in the process of developing a Internet web site and financial search engine for the Internet. GoProfit intends to begin operating its web site by September 1999. Goprofit intends to earn revenue through advertising on its web site. GoProfit was formed in March 1999. GoProfit will be required to raise substantial equity capital to implement its business plan. Subsequent to the Company's acquisition, GoProfit raised additional capital which reduced the Company's holdings of GoProfit to approximately 76% at June 30, 1999. The Company has no obligation to fund the operations of GoProfit. There can be no assurances that GoProfit will raise additional funding for this business or that operations will be successful. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS include all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. INVENTORIES consist of finished goods, work in process and raw materials and are stated at the lower of cost (specific identification) or market. INCOME TAXES - The Company provides for income taxes based on the provisions of Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, which among other things, requires that F-7 recognition of deferred income taxes be measured by the provisions of enacted tax laws in effect at the date of financial statements. PROPERTY, MACHINERY AND EQUIPMENT are stated at cost and are depreciated on the straight-line method over their respective estimated useful lives ranging from 3 to 7 years. REVENUE RECOGNITION - The Company recognizes revenue upon shipment of product. ADVERTISING EXPENSES - The Company expenses advertising costs as incurred. Advertising expenses were $16,884 and $0 for the years ended June 30, 1999 and 1998, respectively. FINANCIAL INSTRUMENTS - Financial instruments consist primarily of cash, restricted cash, accounts receivable, notes receivable, investments and obligations under accounts payable, accrued expenses, debt, and capital lease instruments. The carrying amounts of cash, restricted cash, accounts receivable, accounts payable, accrued expenses and short-term debt approximate fair value because of the short maturity of those instruments. The carrying value of the Company's capital lease arrangements approximates fair value because the instruments were valued at the retail cost of the equipment at the time the Company entered into the arrangements. Fair value of officer notes receivable cannot be estimated because of the nature of the relationship with the creditor. The fair value of the note receivable related to the business segment disposal is discussed in Note 5. The fair value of the investment (Note 4) is estimated to be its cost based on the negotiated amount of the investment and the short period of time that has elapsed as of June 30, 1999, from when the investment was made. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. LOSS PER COMMON SHARE - Net loss per common share is calculated under the provisions of SFAS No. 128 EARNINGS PER SHARE, by dividing net loss by the weighted average number of common shares outstanding. SOFTWARE DEVELOPMENT COSTS - The costs incurred by GoProfit to develop its software related to its Internet web site have been capitalized in accordance with Statement of Position 98-1 ACCOUNTING FOR COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. All costs associated with the development costs, primarily personnel and outside consultants, incurred from the application development stage and forward are capitalized and included in property and equipment in the accompanying balance sheet. GoProfit capitalized $227,619 in such costs in the year ended June 30, 1999. Costs will begin to be amortized when the web site begins operation. 3. INVESTMENT The Company entered into an investment agreement in June 1999 to provide $100,000 to a company in exchange for 200,000 shares of the company's common stock and repayment of the loan at 8% interest per annum. The agreement stipulates that the funds are to be held in a separate account F-8 and used by the investee to pay agreed upon expenditures. The shares are being held by a transfer agent and are to be issued ratably as expenditures are approved and paid. Interest only payments are due quarterly and are to commence August 2, 1999 and continue through June 2, 2001 at which time the outstanding principal balance is due. The loan is secured by the all of the assets of the investee. At June 30, 1999, $82,850 had been advanced and the balance of $17,150 remains in the special restricted account. The total investment balance of $100,000 is included in other assets in the accompanying balance sheet. 4. CASH AND CASH EQUIVALENTS The Company maintains cash balances at banks in Arizona and California. Accounts are insured by the Federal Deposit Insurance Corporation up to $100,000. At June 30, 1999, the Company's uninsured bank balances total $7,336. 5. NOTES RECEIVABLE Notes receivable consist of the following at June 30, 1999: Note receivable, sale of assets $ 283,173 Loan to affiliate 200,000 Other receivables 15,750 --------- Total 498,923 Less current portion 274,535 --------- Long-term portion $ 224,388 ========= On November 15, 1996 the Company sold all of its assets related to the operation of the pay-telephone business. In connection with the sale of the assets, the Company received a note receivable of $811,250. The note was payable to the Company in monthly installments of $14,000 including interest at 8% per annum, which were to commence February 15, 1997, with the balance due January 15, 2002. No payments had been received on the note through June 30, 1998 and the Company commenced legal proceedings to collect the amount. An allowance of $405,625 was established at June 30, 1998. A settlement was reached in March 1999 in the amount of $450,000 including a $100,000 payment that was received at time of settlement. The remaining balance is to be paid in quarterly installments of $21,875 commencing July 31, 1999. Management has established the discounted value of the note of $283,173 using a rate of 10%. The Company incurred a net loss of $22,452 in the year ended June 30, 1999, on the basis of the discounted value of the settlement agreement and the carrying amount of the note at the time of the settlement. Interest income was not recognized in the years ended June 30, 1999 and 1998 while the parties were attempting to resolve the matter. The Company loaned $200,000 to an affiliate in June 1999. The note was payable to the Company in monthly installments of interest only at 10% per annum and the principal was due June 1, 2004. The note was repaid to the Company on August 4, 1999. F-9 6. OTHER RECEIVABLE GoProfit had common stock subscriptions of $205,000 outstanding at June 30, 1999. These subscriptions were committed under a note agreement that was collected in July and August of 1999. 7. LOSS PER SHARE
1999 1998 ------------------------------------ ------------------------------------- Per Per (Loss) Shares Share (Loss) Shares Share ---------- ---------- ---------- ---------- ---------- ---------- Net Loss $ (626,210) 5,161,715 $ (769,923) 4,666,099 Preferred Stock Dividends (1,874) -- ---------- ---------- $ (628,084) $ (769,923) ========== ========== BASIC EARNINGS PER SHARE Loss Available to Common Shareholders Continuing operations $ (628,084) $ (0.12) $ (734,510) $ (0.16) Discontinued operations 0 -- (35,413) (0.01) ---------- ---------- ---------- ---------- Total $ (628,084) 5,161,715 $ (0.12) $ (769,923) 4,666,099 $ (0.17) ========== ========== ========== ========== Effect of Dilutive Securities Preferred Stock N/A N/A DILUTED EARNINGS PER SHARE N/A N/A
Diluted earnings per share are not presented because the effect of considering the convertible preferred stock would be antidilutive for both years ending June 30, 1999 and 1998. 8. INVENTORIES Inventories consist of the following at June 30, 1999: Raw materials $ 47,617 Finished goods 136,526 --------- Total inventories $ 184,143 ========= 9. PROPERTY, MACHINERY AND EQUIPMENT Property, machinery and equipment consist of the following at June 30, 1999: Equipment $ 900,546 Computer software technology 587,619 Computer equipment 123,544 Leasehold improvements 51,634 Furniture and fixtures 49,942 Office equipment 37,263 Vehicles 1,250 ---------- Total 1,751,798 Less accumulated depreciation and amortization (216,081) Property, machinery and equipment - net $1,535,717 ========== F-10 Depreciation expense for the years ended June 30, 1999 and 1998 was $220,826 and $8,458, respectively. In the Company's purchase transaction of GoProfit, the excess of the purchase price over the fair value of tangible net assets of GoProfit in the amount of $360,000 was allocated to the software technology. 10. BUSINESS ACQUISITIONS In June 1998, the Company, through its Precision subsidiary, purchased substantially all of the operating assets of Premier Plastics Corporation, a plastic injection molding business in Tempe, Arizona, for an $80,000 cash payment, the assumption of liabilities in the amount of $40,000 and the issuance of 300,000 shares of common stock of the subsidiary valued at $75,000. The acquisition was recorded under the purchase method of accounting. The aggregate purchase price of $195,000 has been allocated to the assets acquired and liabilities assumed based on their respective fair market values. The aggregate consideration paid approximated the fair market value of the net assets acquired and no goodwill was recorded. The operating results of Premier Plastics are included in the accompanying consolidated financial statements for the period June 15, 1998 through June 30, 1998. The Company issued 50,000 shares each to two officers of the Company subsequent to the acquisition decreasing the Company's ownership interest to approximately 87% at June 30, 1999. The following summarizes unaudited pro forma consolidated financial information assuming that the acquisition of Premier Plastics Corporation occurred on July 1, 1997: Net Sales $ 307,601 Net Loss $(693,432) Loss per Share $ (0.15) The pro forma financial information is presented for informational purposes only and may not necessarily reflect the results had Premier Plastics Corporation actually been acquired on July 1, 1997, nor is this information indicative of the future consolidated results. On July 20, 1998, the Company, through its Precision subsidiary, purchased substantially all of the operating assets of Accurate Thermoplastics, Inc., a plastic injection molding business in Mesa, Arizona, for a purchase price of $560,000. The purchase price consisted of a $375,000 cash payment, a promissory note in the amount of $185,000, and the assumption of specified liabilities totaling $662,911. The note is secured by the assets and bears interest at 8%. The Company was in default on this note at June 30, 1999 (Note 12). The acquisition was recorded under the purchase method of accounting. The aggregate purchase price of $1,222,911 has been allocated to the assets acquired and liabilities assumed based on their respective fair market values. The aggregate consideration paid approximated the fair market value of the net assets acquired and no goodwill was recorded. The operating results are included in the accompanying consolidated financial statements for the period July 20, 1998 through June 30, 1999. The consolidated operating results would not have been significantly different if the operations of Accurate Thermoplastics, Inc. had been included from July 1, 1998. F-11 On April 5, 1999, the Company acquired all of the common stock of GoProfit.com, Inc. ("GoProfit") for 600,000 shares of its common stock. GoProfit is a development stage enterprise in the process of developing a Internet web site and financial search engine for the Internet. GoProfit intends to begin operating its web site by September 1999. GoProfit was incorporated in March 1999, and there were no material operations prior to its acquisition by the Company. The acquisition was recorded under the purchase method of accounting. The aggregate purchase price was valued at $360,000 which was determined by the estimated value of the Company's stock at the time of the transaction. The average between the bid and ask price had been approximately $1 per share. The shares issued to the stockholders of GoProfit contained restrictions. The $1 per share value was discounted to $0.60 per share due to those restrictions. The operations of GoProfit are included in the accompanying statement of operations from April 5, 1999 through June 30, 1999. The excess of the purchase price over the fair value of tangible net assets of GoProfit in the amount of $360,000 was allocated to the software technology. GoProfit raised additional capital through the sale of common stock subsequent to the Company's acquisition. The result of those stock sales reduced the Company ownership in GoProfit to approximately 76% at June 30, 1999. A shareholder of the Company is also a shareholder in the minority interest of GoProfit. 11. CUSTOMER DEPOSITS The Company requires a fifty percent deposit at time of order placement for tool work and recognizes the deposit as revenue upon shipment of order. 12. NOTES PAYABLE Notes payable at June 30, 1999 consist of the following: Note payable, collateralized by the assets of a subsidiary, interest at 8.0%, interest and principal due in two installments of $105,000 and $80,000 by January 16, 1999 $ 116,325 Commitment payable, monthly payments of $5,000 due through July 2002. Original face value of $240,000 163,469 --------- Total 279,794 Less current portion (165,007) --------- Long-term portion $ 114,787 ========= F-12 The Company is in default on the note payable at June 30, 1999 and accordingly, the entire balance of $116,325 is classified as current. The debt is payable to the former owner of the assets purchased in July 1998. The Company is negotiating with the note holder and is attempting to restructure the note. Future maturities of principal at June 30, 1999 are as follows: 2000 $ 165,007 2001 52,723 2002 57,098 2003 4,966 --------- Total $ 279,794 ========= 13. FORGIVENESS OF DEBT The Company was performing services in lieu of payments on a $94,639 note payable assumed in the July 1998 acquisition during the year. In March 1999 an agreement was reached with the holder of the note to return all material and tooling belonging to the holder and offset $46,015 owing from the holder against the note balance, resulting in a gain of $48,624. The amount is presented as an extraordinary item in the accompanying statement of operations for the year ended June 30, 1999. There is no tax effect of the extraordinary item. 14. INCOME TAXES The Company recognizes deferred income taxes for the differences between financial accounting and tax bases of assets and liabilities. Income taxes for the years ended June 30, consisted of the following: 1999 1998 --------- --------- Current tax benefit $(252,964) $(134,551) Deferred tax provision 252,964 134,551 --------- --------- Total income tax provision $ -0- $ -0- ========= ========= A deferred tax liability of $121,350 at June 30, 1999 relates primarily to the difference in the financial accounting and tax bases of the note receivable related to the sale of business assets in fiscal 1997. A deferred tax asset of $1,108,607 relates primarily to net operating loss carryforwards at June 30, 1999 of $2,632,000 for both federal and state purposes and a credit for alternative minimum tax purposes of $11,740. The federal carryforwards expire in fiscal 2009 through 2018. The state carryforwards expire in fiscal 2000 through 2004. The net deferred income tax asset balance of $987,257 is offset by an equal valuation allowance at June 30, 1999. F-13 Deferred income taxes for the year ended June 30, 1998, relate to temporary differences for the recognition of a deferred income tax asset for the net operating loss carryforward. The valuation allowance was increased $300,736 from $420,000 (as restated) to $720,736, reflecting primarily the increase in the 1998 current tax benefit and the $162,000 decrease in the deferred income tax liability related to the allowance recorded on note receivable which was accounted for under an installment method for income tax purposes on the sale of assets in fiscal 1997. Deferred income taxes for the year ended June 30, 1999, relate to temporary differences for the recognition of a deferred income tax asset for the net operating loss carryforward. The valuation allowance was increased by $266,521. A decrease in the deferred income tax liability of $40,650 relates to the net change in the note receivable which was accounted for under an installment method for income tax purposes on the sale of assets in fiscal 1997. A reconciliation setting forth the differences between the effective and statutory tax rate is as follows: 1999 1998 -------------------- -------------------- Federal statutory rates (34.0)% $(212,911) (34.0)% $(261,774) State income taxes (8.0) (50,097) (8.0) (61,593) Valuation allowance of operating loss carryforwards 42.6 266,521 39.2 301,810 Other, net (0.6) (3,513) 2.8 21,557 ------ --------- ------ --------- Effective rate -0-% $ -0- -0-% $ -0- ====== ========= ====== ========= 15. LEASES OPERATING LEASES The Company leases its administrative office and operations facility under operating leases that expire in August and July 1999, respectively. Rent expense under these leases was approximately $96,000 and $12,000 for the years ended June 30, 1999 and 1998. Minimum annual lease payments under these agreements for the year ended June 30, 2000 are $7,983. Subsequent to June 30, 1999, GoProfit entered into a lease agreement for new office space that commits GoProfit for rent of $56,100 per year for three years. CAPITAL LEASES The Company leases production equipment under capital leases expiring through June 2002. The following presents future minimum lease payments under capital leases by year and the present value of minimum lease payments as of June 30, 1999: Year ended June 30: 2000 $ 34,229 2001 2,400 2002 2,400 -------- Total minimum lease payments 39,029 Less amount representing interest 1,216 -------- Present value of minimum lease payments 37,813 Current portion 33,435 -------- Long-term portion $ 4,378 ======== Gross cost and accumulated amortization of equipment under the capital leases at June 30, 1999 was approximately $245,000 and $46,301, respectively. F-14 16. STOCKHOLDERS' EQUITY PREFERRED STOCK The Company sold 350 shares of the Series A 6%, $0.001 par value, Cumulative Preferred Stock for $350,000 during the year ended June 30, 1999. The Series A has a liquidation preference of $350,000. The share are convertible to common stock at a rate equal to 75% the average bid price of the common stock for a period of ten days prior to conversion. Dividends of $1,874 are accrued at June 30, 1999. During the year ended June 30, 1999, 2,100 shares of Series B Preferred Stock were converted into 2,100,000 shares of common stock. Series B shares are convertible into 1,000 shares of common stock for each share of preferred. There are no cumulative dividends on the Class B preferred stock. COMMON STOCK The Company issued 600,000 shares of common stock valued at $360,000 for the purchase of all of the common stock of Go-Profit. 17. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments that potentially subject the Company to concentrations of credit risk are primarily accounts receivable. Approximately $142,000 of the accounts receivable balance at June 30, 1999 is due from two significant customers. Approximately 64% of the Company's revenue for the year ended June 30,1999 was derived from three customers, including 33% from one customer. 18. DISCONTINUED OPERATIONS On November 15, 1996 the Company entered into an asset purchase agreement with Tru-Tel Communications, LLC whereby all of the assets related to the operation of the pay-telephone business were sold. Proceeds from the sale included $1,688,750 cash and a promissory note (see Note 5) for $811,250. Tru-Tel Communications, LLC assumed the Company's capital lease on equipment and operating leases on facilities. The Company recorded a gain on the sale of the assets of $1,848,279 after taxes. Revenues from the discontinued operations totaled $835,858 for the year ended June 30, 1997. The results of discontinued operations for the year ended June 30, 1998 represent the final settlement of an estimated sales tax liability that had been contested by the Company. Because the tax benefit of the loss is offset by a corresponding valuation allowance, there is no tax effect of the loss from discontinued operations for the year ended June 30, 1998. 19. EMPLOYEE STOCK OPTION PLAN The Company adopted an employee stock option plan in June 1998 pursuant to which options may be granted to key employees, including officers, whether or not they are directors, who are selected by the Board of Directors. The exercise price of the options granted pursuant to the Plan shall be determined by the Board of Directors on a case-by-case basis. Options are exercisable over a three year period and only while the optionee remains an employee of the Company, except that, in the event of an optionee's termination of employment by reason of disability or death while an employee. The aggregate number of shares that may be issued under the Plan shall not exceed 900,000 shares. As of June 30, 1999, no options had been granted under the Plan. F-15 20. RELATED PARTY TRANSACTIONS The Company forgave loans of $10,000 each to two officers of the Company in May 1999 including accrued interest of $973. The amount was treated as compensation to the officers. The Company pays $3,000 per month to C&N, Inc. ("C&N") for management services. C&N is owned by an officer and director of the Company. The agreement between the Company and C&N commenced on January 1, 1995 and is renewable from year to year. The Company paid C&N $33,000 and $36,000 under this agreement during the years ended June 30, 1999 and 1998, respectively. The Company loaned C&N $200,000 in June 1999. The note was payable to the Company in monthly installments of interest only at 10% per annum and the principal was due June 1, 2004. The note was repaid to the Company on August 4, 1999. Management fees to C&N were suspended while the note was outstanding per the terms of the unsecured promissory note. An officer and director of the Company performs accounting services for the Company at a flat fee per month for compilation and payroll services and is paid an hourly fee for any additional work. The Company paid $34,983 and $28,610 to the officer's accounting firm for the years ended June 30, 1999 and 1998, respectively. In October 1996 the Company entered into a Severance Agreement with a former director of the Company pursuant to which the Company agreed to pay $5,000 per month to the individual through April 1998. For the year ended June 30, 1998 $2,217 is included in discontinued operations relating to this agreement. 21. COMMITMENTS AND CONTINGENCIES On June 15, 1998, the Company entered into an employment agreement with an employee for an initial term of three years. The employee is to receive a base salary ranging from $65,000 to $95,000 depending on annual sales and shall be adjusted annually by the increase, if any, in the cost of living. For each fiscal year in which the Company has positive earnings before depreciation, interest and taxes (EBDIT) in the amount of $500,000, the employee shall receive a bonus of 5% of EBDIT. The agreement is renewable for additional three year terms. The Company entered into an employment agreement with an employee on July 1, 1998 for an initial term of three years. The employee is to receive a base salary of $36,000 and shall be adjusted annually by the increase, if any, in the cost of living. The employee is entitled to an annual bonus as determined by the Board of Directors. GoProfit entered into a five year consulting agreement with one of its stockholders. The agreement calls for payments of $5,000 per month. The consultant is to provide strategic advice, consult on mergers and acquisitions and assist GoProfit in securing capital. F-16 GoProfit has entered into agreements with third parties for the provision of its search engine software and news and stock quote services for its Internet web site. The commitment for the software at June 30, 1999 was $115,000. The commitment for the news and query services at June 30, 1999, was $48,000. 22. SUBSEQUENT EVENTS On July 12, 1999, 600 shares of Series B Preferred Stock were converted into 600,000 shares of common stock. 23. SEGMENT INFORMATION The Company is operating in two business segments at June 30, 1999. The Company operates a plastics injection molding operation through its Precision Plastics subsidiary and intends to operate an Internet web site through its GoProfit subsidiary. The parent Company has no business operations that generate revenue. However, the parent Company incurs expenses as it seeks additional business opportunities. Precision GoProfit Parent Total ---------- ---------- ---------- ---------- Revenues $1,367,610 $ 900 $1,368,510 Segment loss $ (165,352) $ (164,107) $ (296,751) $ (626,210) Total assets $1,260,617 $1,087,774 $ 686,411 $3,034,802 Capital expenditures $ 18,386 $ 361,005 $ 379,391 Depreciation $ 212,762 $ 785 $ 7,279 $ 220,826 * * * * * * F-17 EX-10.11 2 STOCK PURCHASE AGR. WITH GOPROFIT.COM, INC. STOCK PURCHASE AGREEMENT This Stock Purchase Agreement ("Agreement") is entered into this 5th day of April 1999 by GOPROFIT.COM ("hereafter GP"), a Nevada corporation and the shareholders of GOPROFIT.COM, INC. (Seller) with Diamond Equities, Inc., a Nevada corporation ("Diamond"). RECITALS GP operates a business primarily engaged in the Internet business. GP owns contract rights, customer lists, intellectual property including trade secrets, methods process, know-how, drawings, specifications and all memoranda, notes and records with regard to any research and development ("Assets") and miscellaneous assets used in connection with the operation of its business; GP currently has issued and outstanding two million four hundred and fifty thousand (2,450,000) shares of common stock ("Stock"). GP has not issued any Preferred Stock, Warrants, or Options in relation to the common stock, however Diamond recognizes that GP has set aside 735,000 Shares of common stock in the form of Stock Options exercisable at $1.00 per share to serve as further compensation to the following three groups: 245,000 shares of common stock for Management; 245,000 shares of common stock for Consultants / Professional Services Providers; 245,000 shares of common stock for Employee / Independent Contractor Compensation. All three stock pools will vest at the same percentage rate, based on the same target dates to be determined by GP's current board of directors: Jeff Dalton, David Firestone, David Holifield, and Louis Torres. A more complete description of GP's stock option program will be attached as an exhibit to this document as soon as it is completed. Purchaser desires to acquire one hundred percent (100%) of the Stock of GP and make it a subsidiary of Diamond. Seller desires to sell such Stock to Purchaser; and WHEREAS, Seller's are the sole shareholders of GP; and WHEREAS, Diamond Equities, Inc. is a public company NOW THEREFORE, IT IS AGREED AS FOLLOWS: SECTION 1. ASSETS AND LIABILITIES. 1.1 ASSETS. Seller agrees to sell to Diamond and Diamond agrees to purchase from Seller, on the terms and conditions set forth in this Agreement. Seller owns stock in GP which has assets including contract rights, customer lists, intellectual property including trade secrets, methods process, know-how, drawings, specifications and all memoranda, notes and records with regard to any Page 1 of 18 research and development ("Assets") and miscellaneous assets used in connection with the operation of its business. Assets shall include all accounts receivable, notes receivable, prepaid accounts, contracts, and any other assets of the business specified herein. 1.2 LIABILITIES. Diamond shall not accept the assignment or assume responsibility for any unfilled orders from customers of GP. Diamond shall not assume or perform any of GP's obligations under leases, agreements, and other contracts. SECTION 2. EXCHANGE OF STOCK. Diamond and the Sellers will exchange stock as follows: 2.1 At Closing, Diamond shall issue to Sellers six hundred (600) shares of Class B Preferred Stock. The Preferred Stock will convert into six hundred thousand (600,000) shares of common stock in Diamond. 2.2 At Closing, the Sellers shall transfer one hundred percent (100%) of the outstanding shares of GP to Diamond. GP shall become a wholly owned subsidiary of Diamond. 2.3 Piggyback Registration Rights. Diamond agrees that if is should elect to file a registration statement, as referred to in this agreement, that Diamond shall include on a one time basis at its own expense, those common shares into which the Preferred Shares exchanged hereunder may be converted. SECTION 3. SELLER'S AND GP'S REPRESENTATIONS AND WARRANTIES. GP and Seller each represent and warrant to Diamond as follows: 3.1 CORPORATE EXISTENCE. Seller is now and on the Closing Date will be a corporation duly organized and validly existing and in good standing under the laws of the State of Nevada. GP has all requisite corporate power and authority to own, operate and/or lease the Assets, as the case may be, and to carry on its business as now being conducted. 3.2 AUTHORIZATION. The execution, delivery, and performance of this Agreement have been duly authorized and approved by the board of directors and shareholders of GP, and this Agreement constitutes a valid and binding Agreement of Seller in accordance with its terms. 3.3 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are GP's financial statements. The Financial Statements are in accordance with the books and records of GP and are true, correct, and complete; fairly present financial conditions of GP at the dates of such Financial Statements and the results of its operations for the periods then ended; and were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior accounting periods. Except as described in this Agreement, since March 31, 1999 there has been no material adverse change in the financial condition of GP. Page 2 of 18 3.4 OWNERSHIP OF STOCK. Seller holds good and marketable stock certificates of GP, free and clear of restrictions on or conditions to transfer or assignment, and free and clear of liens, pledges, charges, or encumbrances. All subscriptions must be paid before documents are signed. 3.5 BROKERS AND FINDERS. Neither Seller nor GP has employed any broker or finder in connection with the transactions contemplated by this Agreement, or taken action that would give rise to a valid claim against any party for a brokerage commission, finder's fee, or other like payment. 3.6 TRANSFER NOT SUBJECT TO ENCUMBRANCES OR THIRD-PARTY APPROVAL. The execution and delivery of this Agreement by Seller , and the consummation of the contemplated transactions, will not result in the creation or imposition of any valid lien, charge, or encumbrance on any of the Assets or Stock, and will not require the authorization, consent, or approval of any third party, including any governmental subdivision or regulatory agency. 3.7 LABOR AGREEMENTS AND DISPUTES. GP is neither a party to, nor otherwise subject to any collective bargaining or other agreement governing the wages, hours, and terms of employment of GP's employees. Neither Seller nor GP is aware of any labor dispute or labor trouble involving employees of GP, nor has there been any such dispute or trouble during the two years preceding the date of this Agreement. 3.8 ERISA AND RELATED MATTERS. There are no "Employee Welfare Benefit Plans" or "Employee Pension Benefit Plans" (as defined in (0)(0)3(1) and 3(2), respectively, of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) existing on the date hereof that are or have been maintained or contributed to by GP. There will be a management and employee stock option play. 3.9 NONCANCELLABLE CONTRACTS. At the time of Closing, there will be no material leases, employment contracts, contracts for services or maintenance, or other similar contracts existing or relating to or connected with the operation of GP's business not cancelable within thirty (30) days, except those Agreements listed on Exhibit B. 3.10 COMPLIANCE WITH CODES AND REGULATIONS. Seller and GP are not in violation of any federal, state, or local government codes, ordinances, orders, or regulations. 3.11 LITIGATION. Seller and GP have no knowledge of any claim, litigation, proceeding, or investigation pending or threatened against Seller or GP that might result in any material adverse change in the business or condition of Assets or Stock being conveyed under this Agreement. 3.12 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the representations or warranties of Seller or GP contain or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make statements in this Agreement not misleading. Seller and GP know of no fact that has resulted, or that in the reasonable judgment of Seller will Page 3 of 18 result in a material change in the business, operations, or assets of GP that has not been set forth in this Agreement or otherwise disclosed to Diamond. SECTION 4. DIAMOND REPRESENTS AND WARRANTS AS FOLLOWS: 4.1 ORGANIZATION AND STANDING. Diamond is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify would have a material Adverse Effect. Whenever used in this Section, "Material Adverse Effect" shall mean a material adverse effect on the business, properties, prospects, conditions (financial or otherwise) or result of operations of Diamond. 4.2 AUTHORITY, APPROVAL AND ENFORCEABILITY. a. Subject to obtaining the required approval of the Diamond Board, which approval shall be obtained prior to the Closing Date, Diamond has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and all corporate action on its part necessary for such execution, delivery and performance has been duly taken. Any approval of the Transactions or any portion thereof by Diamond shareholders shall be obtained in compliance with applicable corporate law and, to the extent applicable, state and federal securities laws. b. The execution and delivery of Diamond of the Agreement do not, and the performance and consummation of the Transactions will not, result in or give rise to (with or without giving of notice of the lapse of time, or both) any conflict with, breach or violation of, or default, termination, forfeiture or acceleration of obligations under, any terms or provision of its (i) Articles of Incorporation or Bylaws, (ii) any statute, rule, regulation or any judicial, governmental, regulatory or administrative decree, order or judgment applicable to it, or (iii) any agreement, lease or other instrument to which Diamond is a party or to which it or any of its assets may be bound. c. No consent, approval authorization, order, registration, qualification or filing of or with any court or any regulatory authority or any other governmental or administrative body is required on the part of Diamond for the consummation by Diamond of the Transaction, except any approvals or filings required under state "blue sky" laws. d. This agreement is the legal, valid and binding obligation of Diamond, enforceable against Diamond in accordance with the terms hereof, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and subject to general equitable principals. 4.3 FINANCIAL STATEMENTS AND REPORTS. Diamond has delivered to the Company and the Members complete copies of its audited financial statements for the year ended June 30, 1998 and June 30, 1997 and for operation ended September 30, 1998, December 31, 1998 (the "Diamond Financial Statements"). The Diamond Page 4 of 18 Financial Statements (i) have been prepared from the books and records of Diamond in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods indicated, (ii) are complete and correct and present fairly the financial position of the Company as of the respective dates and the results of its operations and cash flows for the periods then ended, and (iii) contain and reflect adequate reserves for all liabilities or obligations of any nature, whether absolute, contingent or otherwise. 4.4 MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has been no material change in Diamond financial condition, assets or liabilities. 4.5 DIAMOND SHARES. The Diamond Shares to be issued to GP as contemplated hereunder are (i) duly authorized, (ii) when issued and exchanged pursuant to the terms of this Agreement, will be validly issued, fully paid, non-assessable and not subject to any preemptive rights, and (iii) based in part upon the representations of GP in this Agreement, shall be issued in compliance with all applicable federal and state securities laws. The Diamond Common Stock issuable upon conversion of Series B Preferred Stock issue pursuant to this Agreement has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Certificate of Determination of the Rights, Preferences and Privileges of the Series B Preferred Stock, shall be duly and validly issued, fully paid and non-assessable. 4.6 LITIGATION. There are no (a) actions, proceedings or investigations pending or any threat thereof, or verdicts or judgments entered against Diamond before any court or before any administrative agency or officer or (b) violations by Diamond of any foreign, federal, state or local laws, regulations or orders, including but not limited to laws pertaining to workplace safety and environmental clean-up. 4.7 TAX RETURNS AND PAYMENTS. Diamond has timely filed or caused to be filed and accurately prepared all federal and state income tax returns and all other federal and state tax returns which are required to be filed by Diamond. As of the Closing, there are no (i) federal or state taxes that are due and owing by Diamond, or (ii) penalties owed by Diamond for failure to timely file any federal or state tax returns or pay any federal or state taxes. Diamond Ha no knowledge that the federal and state tax returns of Diamond are now being or have ever been audited by the Internal Revenue service, the Nevada Franchise Tax Board, or Nevada State Board of Equalization or the applicable Arizona Departments of Revenue, respectively, and no waivers of the applicable statute of limitations have been executed. 4.9 REGISTRATION RIGHTS. Diamond is not a party to any "registration rights agreement" or any similar agreement pursuant to which any person or entity would have the right or cause, under any circumstances, the registration of Diamond securities under the Securities Act of 1933, as amended. Page 5 of 18 4.10 NO BROKER. Diamond is not obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with any transaction contemplated hereby or thereby. 4.11 TAX-FREE CAPITALIZATION. Diamond has not entered into any agreement or engaged in any transaction which would preclude the treatment of the transactions contemplated hereby as a tax-free transfer of property to it solely in exchange for its stock within the meaning of Section 351 of the Code. 4.12 DISCLOSURE; ACCURACY OF DOCUMENTS AND INFORMATION. Diamond and GP have disclosed all events, conditions and facts materially affecting the business and prospects of Diamond or GP. Diamond and GP have not withheld knowledge of any such events, conditions or facts which Diamond or GP knows, or has reasonable grounds to know, may materially affect Diamond's business and prospects. No representation, warranty or statement made by Diamond or GP in this Agreement, or any document furnished by Diamond pursuant to the terms of this Agreement, or otherwise provided to Diamond or GP, when taken together with this Agreement in its entirety and all such documents, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 5. COVENANTS OF SELLER AND GP. 5.1 GP'S OPERATION OF BUSINESS PRIOR TO CLOSING. Seller and GP agree that between the date of this Agreement and the Closing Date, Seller and GP will: 5.1.1 Continue to operate the business that is the subject of this Agreement in the usual and ordinary course and in substantial conformity with all applicable laws, ordinances, regulations, rules, or orders, and will use its best efforts to preserve its business organization and preserve the continued operation of its business with its customers, suppliers, and others having business relations with GP. 5.1.2 Not assign, sell, lease, or otherwise transfer or dispose of any of the Assets used in the performance of its business, whether now owned or hereafter acquired, except in the normal and ordinary course of business and in connection with its normal operation. 5.1.3 Not issue, pledge, or promise any common stock, preferred stock, options, or warrants of GP other than that disclosed in this agreement. Seller and GP know of no fact that has resulted, or that in the reasonable judgment of Seller will result in a material change in the business, operations, or assets of GP that has not been set forth in this Agreement or otherwise disclosed to Diamond. Page 6 of 18 5.2 ACCESS TO INFORMATION. At reasonable times prior to the Closing Date, Seller and GP will provide Diamond and its representatives with reasonable access to the Assets, titles, contracts, and records of GP and furnish such additional information concerning GP's business as Diamond from time to time may reasonably request. 5.3 EMPLOYEE MATTERS. 5.3.1 Prior to Closing, GP will deliver to Diamond a list on Exhibit C of the names of all persons on the payroll of GP, together with a statement of amounts paid to each during GP's most recent fiscal year and amounts paid for services from the beginning of the current fiscal year to the Closing Date. GP will also provide Diamond with a schedule of all employee bonus arrangements and a schedule of other material compensation or personnel benefits or policies in effect. If not in effect they will be outlined in Exhibit C of this agreement. 5.3.2 Prior to the Closing Date, GP will not, without Diamond's prior written consent, enter into any material agreement with any employees, increase the rate of compensation or bonus payable to or to become payable to any employee, or effect any changes in the management, personnel policies, or employee benefits, except in accordance with existing employment practices. SECTION 6. COVENANTS OF DIAMOND. 6.1 CONDITIONS AND BEST EFFORTS. Seller and GP will use their best efforts to effectuate transactions contemplated by this Agreement and to fulfill all the conditions of the obligations of Seller and GP under this Agreement, and will do all acts and things as may be required to carry out their respective obligations under this Agreement and to consummate and complete this Agreement. Diamond agrees on a best efforts basis, to assist GP in raising $400,000 working capital and in immediately filing and SB-2 registration document for fund raising, full reporting status and spin-off purposes to be completed and in registration no later that 120 days from the execution date of this agreement. Lou Torres and David Firestone will be copied on all SB-2 filing documentation. On a best efforts basis, Diamond understand that it is obligated to perform the following three tasks; (i) exchange 600 shares of Diamond Class B Preferred Stock for all issued and outstanding shares of GP; (ii) make available within 120 days a total of $400,000 to be utilized in funding the GP Business Plan; (iii) file and SB-2 registration document for full reporting status and spin-off purposes to be completed and in registration no later than 120 days from the execution date of this agreement. Inability to accomplish any one of these requirements, at the option of GP, will result in the rescission of the agreement and the return of the respectively exchanged stock. 6.2 CONFIDENTIAL INFORMATION. If for any reason the transactions are not closed, Diamond will not disclose to third parties any confidential information received from Seller or GP in the course of investigating, negotiating, and performing the transactions contemplated by this Agreement. Page 7 of 18 SECTION 7. CONDITIONS PRECEDENT TO DIAMOND'S OBLIGATIONS. The obligation of Diamond to purchase the Stock is subject to the fulfillment, prior to or at the Closing Date, of each of the following conditions, any one or portion of which may be waived in writing by Diamond: 7.1 Diamond, after inspection of GP's premises, operations, financial and other affairs, as provided in Paragraph 5, approves of the condition and affairs of the Assets or financial results; 7.2 Diamond, on the Closing Date, shall receive all the Stock of Seller free and clear of any liens, encumbrances or other obligations; 7.3 All representations and warranties made in this Agreement by Seller and GP shall be true as of the Closing Date as fully as though such representations and warranties had been made on and as of the Closing Date, and, as of the Closing Date, neither Seller nor GP shall have violated or shall have failed to perform in accordance with any covenant contained in this Agreement. 7.4 There shall have been no material adverse change in the manner of operation of GP's business prior to the Closing Date. 7.5 At the Closing Date no suit, action, or other proceeding shall have been threatened or instituted to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the contemplated transactions. SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND GP. The obligations of Seller and GP to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing Date, of each of the following condition: 8.1 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF PURCHASER. All representations and warranties made in this Agreement by Diamond shall be true as of the Closing Date as fully as though such representations and warranties had been made on and as of the Closing Date, and Diamond shall not have violated or shall not have failed to perform in accordance with any covenant contained in this Agreement. SECTION 9. DIAMOND'S ACCEPTANCE. Diamond represents and acknowledges that it has entered into this Agreement on the basis of its own examination, personal knowledge, and opinion of the value of the business. Diamond has not relied on any representations made by Seller other than those specified in this Agreement. Page 8 of 18 SECTION 10. INDEMNIFICATION AND SURVIVAL. 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Agreement shall survive the Closing of this Agreement, except that any party to whom a representation or warranty has bee made in this Agreement shall be deemed to have waived any misrepresentation or breach of representation or warranty of which such party had knowledge prior to Closing. Any party learning of a misrepresentation or breach of representation or warranty under this Agreement shall immediately give written notice thereof to all other parties to this Agreement. The representations and warranties in this Agreement shall terminate two (2) years from the Closing Date, and such representations or warranties shall thereafter be without force or effect, except any claim with respect to which notice has been given to the party to be charged prior to such expiration date. 10.2 GP'S INDEMNIFICATION. GP hereby agrees to indemnify and hold Diamond, its successors, and assigns harmless from and against: 10.2.1 Any and all claims, liabilities, and obligations of every kind and description, contingent or otherwise, arising out of or related to the operation of GP's business. 10.2.2 Any and all damage or deficiency resulting from any material misrepresentation, breach of warranty or covenant, or non-fulfillment of any agreement on the part of Seller and GP under this Agreement. 10.3 DIAMOND'S INDEMNIFICATION. Diamond agrees to defend, indemnify, and hold harmless Seller from and against: 10.3.1 Any and all claims, liabilities, and obligations of every kind and description arising out of or related to the operation of the business following Closing 10.3.2 Any and all damage or deficiency resulting from any material misrepresentation, breach of warranty or covenant, or non-fulfillment of any agreement on the part of Diamond under this Agreement. SECTION 11. CLOSING. 11.1 DATE. This Agreement shall be closed as soon as practicable after (i) completion of the due diligence investigation contemplated; (ii) execution of this Agreement; (iii) satisfaction of all conditions to closing set forth in this Agreement; and (iv) receipt of any required approvals under Nevada corporate law and any other required regulatory approvals. If Closing has not occurred on or prior to April 10, 1999, then any party may elect to terminate this Agreement. If, however, the Closing has not occurred because of a breach of contract by one or more parties, the breaching party or parties shall remain liable for breach of contract. Page 9 of 18 11.2 OBLIGATIONS OF SELLER AND GP AT THE CLOSING. At the Closing and coincidentally with the performance by Diamond of its obligations described herein, Seller and GP shall deliver to Diamond the following: 11.2.1 All documents specified in the Exhibits referred to herein with the exception of GP's Stock Option Plan to be determined by GP's current board of directors: Jeff Dalton, David Firestone, David Holifield, and Louis Torres. 11.3 All documents which are required to effect transfer to Diamond the GP Stock described herein, including a certificate representing 100% of the common stock of GP. 11.4 OBLIGATIONS OF DIAMOND AT THE CLOSING. At the Closing and coincidentally with the performance by Seller and GP of their obligations described herein, Diamond shall deliver to Seller the following: 11.4.1 Certificate for six hundred (600) shares of Class B Preferred Stock in Diamond Equities Inc. Each share of Class B Preferred Stock converts into one thousand (1,000) shares of common stock in Diamond Equities Inc. SECTION 12. MISCELLANEOUS PROVISIONS. 12.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement may be amended, modified, or supplemented only by a written agreement signed by all of the parties hereto. 12.2 NOTICES. All notices, requests, demands, and other communications required or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or two days after being mailed by certified or registered mail, return receipt requested, with postage prepaid: If to Diamond, to: Copy to: David D. Westfere, President A.F. Schaffer, P.C. Diamond Equities, Inc. 2700 N. Central Avenue, Suite 1500 2010 E. University Drive, Suite 3 Phoenix, AZ 85004 Tempe, AZ 85281 If to Seller, to: Copy to: David Firestone, President Louis Torres, Secretary GoProfit.Com, Inc. GoProfit.Com, Inc. 1801 Century Park East, Suite 1225 3760 Via Pacifica Walk Los Angeles, CA 90067 Oxnard, CA 93035-2227 Page 10 of 18 12.3 ATTORNEY FEES. In the event an arbitration, suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate court. 12.4 LAW GOVERNING. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 12.5 COMPUTATION OF TIME. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period shall begin to run on the next day which is not a Saturday, Sunday or legal holiday. 12.6 TITLES AND CAPTIONS. All section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement. 12.7 PRONOUNS AND PLURALS. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons may require. 12.8 ENTIRE AGREEMENT. This Agreement contains the entire understanding between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. Any amendments to this Agreement must be in writing and signed by the party against whom enforcement of that amendment is sought. 12.9 AGREEMENT BINDING. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. 12.10 ARBITRATION. If at any time during the term of this Agreement any dispute, difference, or disagreement shall arise upon or in respect of the Agreement, and the meaning and construction hereof, every such dispute, difference, and disagreement shall be referred to a single arbiter agreed upon by the parties, or if no single arbiter can be agreed upon, an arbiter or arbiters shall be selected in accordance with the rules of the American Arbitration Association and such dispute, difference, or disagreement shall be settled by arbitration in accordance with the then prevailing commercial rules of the American Arbitration Association, and judgment upon the award rendered by the arbiter may be entered in any court having jurisdiction thereof. 12.11 PRESUMPTION. This Agreement or any Section thereof shall not be construed against any party due to the fact that said Agreement or any Section thereof was drafted by said party. Page 11 of 18 12.12 FURTHER ACTION. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purpose of the Agreement. 12.13 COUNTERPARTS. This Agreement may be executed in several counterparts and all so executed shall constitute one Agreement, binding on all the parties hereto even though all the parties are not signatories to the original or the same counterpart. 12.14 PARTIES IN INTEREST. Nothing herein shall be construed to be to the benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. 12.15 SAVINGS CLAUSE. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. The following parties hereby agree and approve all of the terms and conditions of this Agreement, by signing where indicated. GP: Diamond: GOPROFIT DIAMOND EQUITIES, INC. a Nevada corporation a Nevada corporation By: /s/ David Firestone By: /s/ David D. Westfere ------------------------------- ---------------------------------- David Firestone, President David D. Westfere, President & CEO By: /s/ Louis Torres By: /s/ Todd D. Chisholm ------------------------------- ---------------------------------- Louis Torres, Secretary/Treasurer Todd D. Chisholm, Secretary/Treasurer Page 12 of 18 - -------------------------------------------------------------------------------- Seller: SHAREHOLDERS OF GOPROFIT By: /s/ By: /s/ David Firestone ------------------------------- -------------------------------- GlobalVest Financial, Inc. (400,000) David Firestone (400,000) For and on behalf of By: /s/ VICKERY LIMITED-Director By: /s/ Jeff Dalton ------------------------------- -------------------------------- Hane Development LTD (400,000) Jeff Dalton (400,000) By: /s/ Louis Torres By: /s/ David Holifield ------------------------------- -------------------------------- Louis Torres (400,000) David Holifield (400,000) By: /s/ ------------------------------- For and on behalf of WOODWARD LIMITED-Director Page 13 of 18 EXHIBIT A FINANCIAL STATEMENTS OF GOPROFIT.COM, INC. SEE ATTACHED Page 14 of 18 EXHIBIT B LIST OF CONTRACTS Inktomi Corporation Information Services Agreement Date Feb. 18th, 1999 Page 15 of 18 EXHIBIT C LIST OF EMPLOYEES Name Social Security Number Monthly Rate of Pay - ---- ---------------------- ------------------- 1. David Firestone ###-##-#### $5,000 2. Jeff Dalton ###-##-#### $7,500 3. Louis Torres ###-##-#### $6,500 4. David Holifield ###-##-#### $7,500 GP OPTION PLAN TO BE COMPLETED AFTER MERGER BUT ALLOCATED AS FOLLOWS: 245,000 GP Shares for Management Stock Option Pool 245,000 GP Shares for Consultants/Professional Services Stock Option Pool 245,000 GP Shares for Employee/Private Contractor Stock Option Pool Page 16 of 18 EXHIBIT D GOPROFIT.COM, INC. BUSINESS PLAN SEE ATTACHED Page 17 of 18 EXHIBIT E EMPLOYEE / CONSULTANTS INCENTIVE STOCK OPTION PLAN TO BE PROVIDED UPON COMPLETION Page 18 of 18 EX-10.12 3 CORRECTION AGREEMENT WITH GOPROFIT.COM CORRECTION AGREEMENT This Correction Agreement (this "Correction Agreement") is entered into as of this 11th day of June, 1999 by and between GoProfit.com, a Nevada corporation ("GoProfit"), the undersigned shareholders of GoProfit (collectively, the "Shareholders"), and Diamond Equities, Inc., a Nevada corporation ("Diamond Equities). RECITALS A. GoProfit, the Shareholders and Diamond Equities are parties to that certain Stock Purchase Agreement, dated April 5, 1999 (the "Stock Purchase Agreement"), pursuant to which all of the Shareholders exchanged their shares of GoProfit for 600 shares of non-voting Class B Preferred Stock (the "Preferred Stock") of Diamond Equities. B. The 600 shares of Preferred Stock are convertible into 600,000 shares of common stock of Diamond Equities. C. The Stock Purchase Agreement explicitly states, and it has at all times been the intention of all parties to the Stock Purchase Agreement, that the exchange by the Shareholders of their shares of GoProfit for shares of Class B Preferred Stock of Diamond Equities was to be a tax-free reorganization. D. Since the date of the Stock Purchase Agreement, the parties have determined that one of the requirements of a tax-free reorganization is that the shares issued in such and exchange consist solely of voting shares of the acquiring corporation. E. Diamond Equities mistakenly issued non-voting share of Preferred Stock to the undersigned Shareholders, which issuance will cause the transaction to be in violation of one of the requirements of the tax-free reorganization provisions of the Internal Revenue Code. F. As a result of the mistake made by the parties to the Stock Purchase Agreement, the parties to the Stock Purchase Agreement now desire to correct the Stock Purchase Agreement and the transaction effected thereby, effective as of the original date of the Stock purchase Agreement. AGREEMENT NOW, THEREFORE, in consideration of the representations, warranties, and agreements made herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, GoProfit, the Shareholders and Diamond Equities hereby agree as follows: 1 1. Correction of Stock Purchase Agreement. The parties hereto agree that the Stock Purchase Agreement is hereby corrected and amended, effective as of April 5, 1999, to change to 600 shares of Preferred Stock received by the Shareholders from Diamond Equities pursuant to the Stock Purchase Agreement to 600,000 shares of voting common stock of Diamond Equities. Each of the parties hereto further agrees to hereafter treat the exchange effected under the Stock Purchase Agreement, for all purposes, including tax reporting purposes, financial accounting purposes, and SEC and OTC Bulleting Board reporting and public disclosure purposes, as an exchange of GoProfit common stock for common stock of Diamond Equities. In addition, the parties hereto agree to promptly take all steps necessary and proper to correct the transaction effected by the Stock Purchase Agreement, including without limitation, the following: (A) The Shareholders agree to return all certificates of Preferred Stock received by each of them under the Stock Purchase Agreement to Diamond Equities for cancellation; (B) Diamond Equities agrees to (I) execute, deliver and/or file any and all instruments, documents, notices or other agreements that reflect or evidence the correction of the Stock Purchase Agreement, (ii) issue new certificates to the Shareholders representing 600,000 shares of Diamond Equities common stock, which certificates shall be dated as of April 5, 1999, (iii) notify its transfer agent, and any other appropriate organization or agency, of the correction of the Stock Purchase Agreement. 2. GoProfit and Shareholder Representation and Warranties. Each of the Shareholders hereby severally represents and warrants to Diamond Equities as to itself, that it still is the owner of all the shares of Preferred Stock that it received pursuant to the Stock Purchase Agreement, and that such Shareholder has not sold, transferred or pledged any of the shares of such Preferred Stock since April 5, 1999. 3. Diamond Representations and Warranties. Diamond Equities represents and warrants to each of GoProfit and the Shareholders as follows: a. Corporate Existence and Power. Diamond Equities is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has corporate power and authority to enter into this Correction Agreement and the other documents to which it is a party and to consummate the transactions contemplated hereby and thereby. 2 b. Corporate Authorization of Diamond Equities. The execution, delivery and performance by Diamond Equities of this correction Agreement and any other documents delivered in connection with this correction Agreement, and the consummation by Diamond Equities of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. This Correction Agreement, and each of the other transaction documents to which Diamond Equities is a party, have been duly and validly executed by Diamond Equities and constitutes the legal, valid and binding agreement of Diamond Equities, enforceable against each Diamond Equities in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally. c. Non-Contravention. The execution, delivery and performance by Diamond Equities of this Correction Agreement and the other transaction documents to which Diamond Equities is a party, and consummation of the transactions contemplated hereby and thereby, do not and will not (a) contravene or conflict with the certificate of incorporation or bylaws of Diamond Equities, or (b) contravene or conflict with or constitute a violation of any material provision of any applicable law binding upon or applicable to Diamond Equities. d. Governmental Authorization. The execution, delivery and performance by diamond Equities of this Correction Agreement and any of the other transaction documents requires no action by, consent or approval of, or filing with, any governmental authority. e. Stock Issuance. All of the 600,000 shares of Diamond Equities' common stock issued to the Shareholders pursuant to the Stock Purchase Agreement, as corrected, are validly issued, outstanding, fully paid and nonassessable shares of Diamond Equities common stock. 4. Public Announcements. Each party hereto agrees that, without the consent of the other party, it will not, except as may be required by applicable law, issue any press release or make any public statement with respect to this Correction Agreement or the transactions contemplated hereby. The parties hereto acknowledge that Diamond Equities is a public company and, accordingly, that it may have to issue a press release regarding the Correction Agreement. In the event that Diamond Equities does issue such a press release, Diamond Equities hereby agrees to provide GoProfit with a copy of any such press release prior to its issuance and, in good faith, to take into account any comments GoProfit may reasonably have regarding the disclosure made in any such press release. 3 5. Specific Performance. The parties hereto recognize and agree that in the event of a breach by one party hereto of this Correction Agreement, money damages would not be an adequate remedy to the other party for such breach and, even if money damages were adequate, it would be impossible to ascertain or measure with any degree of accuracy the damages sustained by the non-breaching party therefrom. Accordingly, if there should be a breach or threatened breach by one party of provisions of this Correction Agreement, the non-breaching party or parties shall be entitled to an injunction restraining the breaching party from any breach without showing or proving actual damage sustained by the non-breaching party. 6. Further Assurances. Subject to the terms and conditions of this Correction Agreement, each party will use all reasonable good faith efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or reasonably desirable under applicable law to consummate the transactions contemplated by this Correction Agreement. The parties agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Correction Agreement. 7. Counterparts. This Correction Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 8. Cumulative Remedies. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9. Third Party Beneficiaries. No provision of this Correction Agreement shall create any third party beneficiary rights in any person, other than the parties hereto. 4 IN WITNESS WHEREOF, the parties hereto have caused this Correction Agreement to be duly executed by them or by their respective authorized officers as of the day and year first above written. GP: Diamond: GOPROFIT DIAMOND EQUITIES, INC. a Nevada corporation a Nevada corporation By: /s/ David Firestone By: /s/ David D. Westfere ------------------------------- ---------------------------------- David Firestone, President David D. Westfere, President & CEO By: /s/ Louis Torres By: /s/ Todd D. Chisholm ------------------------------- ---------------------------------- Louis Torres, Secretary/Treasurer Todd D. Chisholm, Secretary/Treasurer Page 12 of 18 - -------------------------------------------------------------------------------- Seller: SHAREHOLDERS OF GOPROFIT By: /s/ By: /s/ David Firestone ------------------------------- -------------------------------- GlobalVest Financial, Inc. (400,000) David Firestone (400,000) For and on behalf of By: /s/ VICKERY LIMITED-Director By: /s/ Jeff Dalton ------------------------------- -------------------------------- Hane Development LTD (400,000) Jeff Dalton (400,000) By: /s/ Louis Torres By: /s/ David Holifield ------------------------------- -------------------------------- Louis Torres (400,000) David Holifield (400,000) By: /s/ ------------------------------- For and on behalf of WOODWARD LIMITED-Director EX-27 4 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1997 1 210,035 0 199,338 13,606 184,143 1,126,734 1,535,717 216,081 3,034,802 796,763 0 0 1,605,541 7,366 264,764 3,034,802 1,368,510 1,368,510 1,063,840 1,008,333 47,759 0 63,665 (674,834) 0 (674,834) 0 48,624 0 (626,210) (.12) 0
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