PAGE>
ROCKY MOUNTAIN POWER CO.
12835 East Arapahoe Road, Tower II, Suite 110-B
Englewood, CO 80112
(303)-792-2466 FAX (303)-792-2467
May 31, 1997
Mr. Donald J. Rinehart and
Mr. Edward Evangelidi
United States Securities and Exchange Commission
Washington D. C. 20549
Mail Stop: 7-9
Re: Rocky Mountain Power Co.
Form 10-SB Amended
File No. 0-22027
Dear Mr. Rinehart and Mr. Evangelidi:
The following are our responses to your comments in your letter
dated March 11, 1997:
Organization
- ------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
2. Changed as suggested.
3. Changed as suggested.
4. Changed as suggested.
5. Disclosure has been made that there has been a
change in control of Rocky Mountain Power Co., but
since the controlling shareholders of Prime and
Pride are now the controlling shareholders of RMPC
and Prime was merged into RMPC and Pride is now a
wholly-owned subsidiary of RMPC, there has been no
real change in control of Prime or Pride, only a
change in control of RMPC.
6. Changed as suggested.
-1-
<PAGE>
Page Two
Business of Issuer
- ------------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
2. Changed as suggested.
3. Changed as suggested. None of the mortgage loans
are to related parties.
4. Changed as suggested.
5. Changed as suggested.
Management's Discussion
- -----------------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
2. Changed as suggested.
3. The updated financial statements of the combined
company will not retain the going concern opinion.
Security Ownership
- ------------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
Certain Relationships and Related Transactions
- ----------------------------------------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
2. Changed as suggested.
3. Changed as suggested.
4. Changed as suggested.
5. The sales were not to related parties.
6. Changed as suggested.
-2-
<PAGE>
Page Three
Recent Sales of Unregistered Securities
- ---------------------------------------
Paragraph # Response
- ----------- --------
1. Changed as suggested.
Exhibits
- --------
Paragraph # Response
- ----------- --------
1. Added as suggested.
2. Added as an exhibit as suggested.
Financial Statements
- --------------------
Paragraph # Response
- ----------- --------
1. As more fully now explained in the Form 10-SB,
nearly all (approximately 90%) of the initial
assets were acquired from Mr. Michael L.
Schumacher and Mr. Harold L. Morris. These assets
consisted principally of real estate and mortgage
loans collateralized by real estate. The total
value and predecessor cost of these assets net of
related debt was approximately $1,800,000. These
assets were owned by Mr. Schumacher or Mr. Morris
directly or by their respective pension plans and/
or family partnerships. There was no gain
recognized on the transfer of the assets to PRIME,
since they were transferred at fair not to exceed
approximate predecessor cost. Fair value and
predecessor cost were approximately the same as
determined by real estate appraisals on real
estate owned. The mortgage notes receivable were
valued at the unpaid principal and interest
balances, not to exceed estimated fair value of
the underlying collateral. As of March 31, 1997
approximately $1,050,000 of the $1,800,000 assets
contributed for stock of PRIME by Mr. Schumacher
and Mr. Morris were sold or paid off with cash.
Of this approximate $1,080,000, $200,000 of the
mortgage notes receivable contributed for stock
were subsequently paid off in full. Approximately
$850,000 of the $1,050,000 assets were sold with
the company carrying back mortgages on the real
properties with approximately $150,000 of the
$850,000 having been subsequently collected by the
company in cash.
-3-
<PAGE>
Page Four
Over the nearly two year period from May 1, 1995
to March 31, 1997, approximately $100,000 of gain
related to the sale of these properties was
recognized in the accompanying financial
statements. The certificates of purchase shown on
the balance sheets as of October 31, 1996 and
March 31, 1997 were acquired at foreclosure sales
and not acquired from stockholders or related.
2. Changed as suggested.
3. Changed as suggested.
4. Updated financial statements have been included in
the filing.
Closing Comments
- ----------------
We take note of the closing comments in your letter dated March
11, 1997
Sincerely,
/S/ Michael L. Schumacher
- -------------------------
Michael L. Schumacher
President
-4-
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Rocky Mountain Power Co.
---------------------------------------------
(Name of Small business Issuer in its charter)
Colorado, 84-0503585
------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12835 E. Arapahoe Road, T-II #110, Englewood, Colorado 80112
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (303) 792-2466
--------------------------------------------------------
Securities to be registered under Section 12(b) of the Acts
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
-----------------------------------------------------------
Securities to be registered under Section 12(g) of the Acts
Common Stock $0.05 par value per share
--------------------------------------
(Title of Class)
1
<PAGE>
PART I
ALTERNATIVE 3
ITEM 1. DESCRIPTION OF BUSINESS.
(ITEM 101 OF REGULATION S-B)
ORGANIZATION
Rocky Mountain Power Co. (RMPC) is a corporation which was formed under the
laws of the State of Colorado on September 30, 1958. The Articles of
Incorporation of the Company authorize it to issue 100,000,000 shares of
common stock with $.05 per share par value and 200,000 shares of preferred
stock with a par value of $25.00 per share.
During December 1996, and subsequently amended March 20, 1997, RMPC entered
into an agreement with Prime Rate Investment Management, Inc. (PRIME), a
Colorado corporation, incorporated on May 1, 1995. Under the terms of the
amended agreement, PRIME became a 93.65% owned subsidiary of RMPC. Prime
Rate Income & Dividend Enterprises, Inc. (PRIDE, a wholly owned subsidiary of
PRIME) owned approximately 40% of the issued and outstanding common stock and
100% of the issued and outstanding preferred stock of RMPC prior to the March
31, 1997 business combination/reorganization. Effective April 30, 1997 PRIME
was merged into RMPC with PRIDE then becoming a wholly-owned subsidiary of
RMPC.
The Company's Board of Directors and stockholders approved a 1 for 50 reverse
stock split. Effective March 31, 1997, the effective date of the business
combination/reorganization, the preferred stock of RMPC was cancelled and
shares (post reverse stock split) of RMPC common stock were issued for PRIME
and for cancelling of the preferred and common shares of RMPC owned by PRIDE.
The shares of RMPC representing 40% ownership of RMPC by PRIDE were also
cancelled. Upon completion of the business combination/reorganization, and
merger of PRIME into RMPC, the former PRIME shareholders own approximately
97% of the approximate 718,226 shares outstanding of RMPC and the transaction
has been accounted for as a reverse acquisition. The business combination
that occurred March 31, 1997 was a transaction between two related parties
and, therefore, not at arms-length. Mr. Michael L. Schumacher and Mr. George
A. Powell are President and Vice-President, respectively of both RMPC and
PRIME. Mr. Schumacher and Mr. Powell are the sole directors of PRIME and are
two of the five directors of RMPC. Prior to the business combination, RMPC
had approximately 218 shareholders and PRIME had approximately 232 beneficial
shareholders. PRIDE was a wholly-owned subsidiary of PRIME and was a
shareholder of RMPC prior to the business combination and owned approximately
40% of RMPC. Mr. Schumacher had beneficial ownership of approximately 30% of
PRIME and Mr. Powell had approximately 1% beneficial ownership of PRIME.
Seven other stockholders owned beneficially various percentages ranging from
approximately 3% to 10% each. These nine individuals beneficially owned
together, owned approximately 90% of PRIME and own approximately 87% of RMPC
after the business combination. To effect this business combination, RMPC
issued 655,582 shares of common stock to 12 shareholders of PRIME in exchange
for their 93.65% ownership of PRIME while PRIDE returned its 40% ownership of
RMPC for cancellation; thus, the net effect was that the former owners of
2
<PAGE>
PRIME became 97% owners of RMPC, resulting in a change in control of RMPC.
References to ("the Company") refer to RMPC and subsidiaries on a combined
basis. All references to PRIME refer to Prime Rate Investment Management
Enterprises, Inc., the full name as shown in the financial statements. RMPC
and PRIME have not been subject to any bankruptcies, receiverships or
similar proceedings.
After completion of the merger of PRIME into RMPC, RMPC has approximately
450 shareholders.
The principal executive offices of the Company are located at 12835 E.
Arapahoe Road, T-II, #110, Englewood, Colorado 80112, and the Company's
telephone number is (303) 792-2466.
The Company has selected June 30 as its fiscal year end.
BUSINESS OF ISSUER: PRINCIPAL PRODUCTS AND SERVICES
RMPC was previously in the business of investing in water rights in Colorado.
During the three years ended June 30, 1996 and subsequent to June 30, 1996,
prior to the business combination, RMPC had no operating income and incurred
various operating expenses totaling approximately $36,000, $30,000 and
$10,000, respectively, during the three years ended June 30, 1994, 1995 and
1996. In addition, during the year ended June 30, 1995, RMPC wrote off its
investment in water rights resulting in a loss of approximately $445,000.
RMPC was originally decreed certain conditional water rights in Garfield and
Eagle Counties, Colorado, on the South Fork of the White River and some
tributaries. These water rights required continued due diligence activities
to maintain those water rights. RMPC did not file the required application
for due diligence by June, 1995, thus, the water rights lapsed. The carrying
amount of approximately $445,000 of RMPC's investment in the water rights was
charged against operations for the year ended June 30, 1995. RMPC has no
remaining claims related to the lapsed water rights and has no claim against
any individual, entity or the federal government for the loss. During the
year ended June 30, 1995, RMPC abandoned all water rights previously
controlled. Effective November 1, 1996, RMPC acquired nine residential lots
in exchange for 12,000 shares post split shares of its common stock issued
to PRIDE. RMPC also acquired effective November 1, 1996, approximately
$800,000 of mortgage loans from PRIDE in exchange for 32,000 shares of $25.00
par value, 6% cumulative preferred stock. The principal balances on these
mortgage loans totalled approximately $800,000 with a weighted average
interest rate of approximately 8% per annum. In exchange for the mortgage
loans, RMPC issued 32,000 shares of $25.00 par value preferred stock. The
preferred stock had a 6% per annum cumulative dividend provision. As a part
of the business combination effective March 31, 1997, these common and
preferred shares were cancelled.
As of March 31, 1997 the Company had $767,225 invested in mortgage notes
receivable. The Company's investments in mortgage loans are collateralized
principally by first deeds of trust on real estate located primarily in
Colorado and California. As of March 31, 1997, the Company had six mortgage
loans receivable from one individual totalling approximately $346,000. The
loans as a percentage of value of the real estate collateral are approximately
90%. The Company also had, as of January 31, 1997 eleven mortgage loans
3
<PAGE>
receivable from another individual totalling approximately $349,000. The
second individual's loans as a percentage of value of the real estate
collateral are approximately 100% but, as additional collateral for the loans
receivable from this individual, the Company has a junior lien on another
property owned by this individual. These mortgage loans to the two
individuals are a material concentration of credit risk.
The business purposes of the reverse acquisition from PRIME's perspective
include a larger stockholder base, the potential to possibly utilize certain
net operating loss carryovers of RMPC, having a corporate charter that dates
back to 1958, and the continued service of certain directors and an officer
of RMPC. From RMPC's perspective, the business purpose was principally to
become engaged in an active business for the benefit of its shareholders.
As a result of the foregoing, RMPC initially became the holder of 93.65% of
the outstanding shares of PRIME. Each of the twelve beneficial shareholders
of PRIME who exchanged their respective shares was an officer, director or
principal shareholder of PRIME and by reason thereof had access to all
material information about PRIME and were provided with all material
information about the business and financial position of the Company. Further,
each such person is sophisticated and knowledgeable in business and financial
matters and is able therefore to evaluate the information about PRIME and the
Company without need for protections that may be available if the
transactions were the subject of a registration statement under the
Securities Act of 1933. It is the position of the Company that the exchange
transactions with the twelve shareholders of PRIME are exempt from
registration under the 1933 Act by reason of Section 4(2) as being
transactions by an issuer not involving a public distribution.
The remaining outstanding shares of PRIME representing approximately 6.35% of
the total outstanding shares were held beneficially by 82 individuals.
Effective April 30, 1997 pursuant subject to the notice provisions of the
Colorado Business Corporation Act, the Company merged PRIME into RMPC through
action of the Boards of Directors of both companies and without seeking
approval of the respective shareholders of each company. Section 7-11-104 of
the Colorado Business Corporation Act authorizes a merger of a parent and
subsidiary without a vote of shareholders of either company if the parent
holds at least 90% of the outstanding shares of the subsidiary. Since there
was no shareholders' vote or consent on this matter, there is no sale, as
contemplated by Rule 145 under the 1933 Act, of the Company's common stock
which was issued to the remaining shareholders of PRIME and thus, the
transaction is not subject to the registration requirements of Section 5 of
the 1933 Act.
PRIDE, is principally in the real estate investment business. PRIDE owns
residential rental real estate in Arizona, California, Arkansas and a health/
racquetball club in California. PRIDE also is in the business of investing
in foreclosure sale real estate certificates of purchase in the Denver
Metropolitan area. PRIDE acquires the certificates of purchase by bidding at
foreclosure sales. Under Colorado statutes, there is generally a minimum
redemption period of seventy-five (75) days whereby the property owner can
redeem the foreclosed property by paying the certificate of purchase balance
bid price plus interest at the rate specified on the mortgage note, plus
reimbursement of certain costs and expenses incurred by the holder of the
certificate of purchase during the redemption period. If the former
4
<PAGE>
property owner fails to redeem the property, then junior lienholders have a
right to redeem. If the property is not redeemed, the holder of the
certificate of purchase will be granted title to the property. It is PRIDE's
investment policy to invest in certificates of purchase that have sufficient
equity such that it is likely that the property will be redeemed.
DISTRIBUTION OF PRODUCTS AND SERVICES
PRIME markets its real estate generally through listings with real estate
brokers.
COMPETITION
PRIME's real estate business is highly competitive. There are thousands of
real estate investors in the United States of America that are investing in
similar rental properties. The level of competition in the acquisition, sale
and renting of real estate properties is effected by economic conditions in
the area as well as interest rates available to borrowers. PRIME's business
of investing in certificates of purchase is also highly competitive since
there is open bidding allowed on all real estate foreclosures. Typically at
the foreclosure sales, there will be between five and twenty individuals in
attendance and between three and seven actual bidders in addition to the
foreclosing lenders bidding on the properties collateralizing their loans.
AVAILABILITY OF RAW MATERIAL: PRINCIPAL SUPPLIERS
Since the Company is not involved in manufacturing, there is no need for raw
materials. Supplies used in the business are minimal. The number of
foreclosure sales is directly related to economic conditions and interest
rates in the area and therefore, the inventory of potential certificates of
purchase available varies over time.
PATENTS AND INTELLECTUAL PROPERTY
The Company has no patent or intellectual property rights.
GOVERNMENTAL APPROVAL
There are no governmental approval requirements related to the Company's
business.
EFFECT OF GOVERNMENTAL REGULATIONS: COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company is not materially effected by any specific governmental
regulations other than various states limit the interest rates charged on
loans. Under certain circumstances, the Company will sell properties and
carry back mortgage loans on the properties. The Company does not charge
interest rates in excess of rates allowed by law. With respect to the
Company's investments in certificates of purchase, the redemption period is
5
<PAGE>
generally 75 days. The redemption period may be extended beyond the 75 days
under certain circumstances. If the original owner of the property declares
bankruptcy, the redemption period may be extended for up to an additional 60
day period. If the Internal Revenue Service (IRS) is a junior lienholder on
the property and the IRS files an intent to redeem, the redemption period is
extended for an additional 45 day period. In addition, each lienholder
behind the foreclosed lien is generally entitled to additional time to redeem.
The first lienholder behind the foreclosing lien has an additional 10 days,
with each following lienholder another 5 days. These statutes could delay the
Company in either receiving title to the property or receiving the proceeds
from the redemption. During the redemption period, according to various
statutes, if the Company incurs certain costs such as inspection fees, repairs
and maintenance and legal fees, the Company is entitled to be reimbursed for
these costs. The Company complies with the applicable provisions of the
statutes.
Various local zoning, homeowners associations and various other rules and
regulations limit how properties may be used and require certain maintenance
and repairs for properties. Certain federal and state environmental
protection statutes exist related to hazardous wastes and other environmental
concerns. The Company is in compliance with all environmental laws.
RESEARCH AND DEVELOPMENT
The Company has not been involved in any research and development projects.
EMPLOYEES
The Company has no full time employees. Mr. Michael L. Schumacher, the
Company's President, Mr.,George A. Powell, the Company's Vice President and
Mr. James D. Phelps, the Company's Secretary/Treasurer devote approximately
25%, 50% and 1% respectively, of their time to the Company's business. The
real estate properties are managed by various independent property management
companies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(Item 303 of Regulation S-B)
GENERAL
RMPC was organized on September 30, 1958 but was relatively inactive during
the past three years. RMPC formerly held interests in certain water rights
in Colorado that now have been abandoned. As described in Part I, Item 1,
RMPC has entered into a business combination with PRIME, principally in the
real estate investment business.
RESULTS OF OPERATIONS (PRIME CONSOLIDATED)
Six Months Ended October 31, 1995 and Year Ended October 31, 1996
- -----------------------------------------------------------------
6
<PAGE>
Revenue for the six months ended October 31, 1995 was approximately $110,000.
Revenue for the year ended October 31, 1996 was approximately $342,000. From
inception to October 31, 1995, rent income totalled approximately $96,000 and
interest income totalled approximately $14,000. For the year ended October
31, 1996, rent income totalled approximately $151,000 and interest income
totalled approximately $85,000. The gain on sale of real estate totalled
approximately $101,000 during the year ended October 31, 1996 and the gain on
the sale of security investments totalled approximately $5,000 during the
year ended October 31, 1996. There were no sales of real estate or security
investments during the six month period ended October 31, 1995. During the
year ended October 31, 1996, the Company's management decided to sell its
real estate in Colorado resulting in a gain of approximately $101,000,
because management believed that the Colorado real estate values reached a
peak during 1996. The sale of the Colorado properties resulted in less rental
income on a monthly basis in 1996 but increased the interest income per month
related to the mortgage notes receivables carried on the properties sold.
Operating expenses were approximately $92,000 during the six month period
ended October 31, 1995 as compared to approximately $151,000 during the year
ended October 31, 1996. Expenses decreased on a monthly basis during 1996
principally due to less real estate expenses after the Colorado properties
were sold.
Five Months Ended March 31, 1996 and March 31, 1997
- ---------------------------------------------------
Revenue for the five months ended March 31, 1996 was approximately $100,000
as compared to revenue of approximately $129,000 for the five months ended
March 31, 1997, an increase of approximately $29,000. This increase resulted
principally from rent on the Company's investment in the racquetball/health
club facility in California of approximately $29,000. This property was not
owned by the Company during the five month period ended March 31, 1996. The
Company, during the year ended October 31, 1996 sold various real estate
properties, while carrying back mortgages on the sold properties, resulting
in increased interest earned of approximately $27,000 and decrease in rental
income of approximately $35,000 during the comparable prior period.
Operating expenses decreased from approximately $76,000 during the five months
ended March 31, 1996 to approximately $73,000 during the five month period
ended March 31, 1997, a decrease of approximately $3,000. This decrease
results primarily from less costs associated with carryback mortgages as
compared to operating costs of real estate owned.
Net income after the provision for income taxes increased from approximately
$19,000 during the five month period ended March 31, 1996 to approximately
$50,000 during the five month period ended March 31, 1997, an increase of
approximately $31,000. The Company's consolidated stockholders' equity was
approximately $2,065,000 at March 31, 1997. The Company's consolidated
proforma stockholders' equity after merger of PRIME into RMPC effective April
30, 1997 was approximately $2,202,000.
LIQUIDITY AND CAPITAL RESOURCES
7
<PAGE>
At October 31, 1996, the Company's combined cash balance was approximately
$45,000. The Company's current assets at October 31, 1996 totalled
approximately $665,000 and its current liabilities totalled approximately
$215,000, resulting in net working capital of $450,000, a current ratio of
approximately three to one.
At March 31, 1997 the Company had an unrestricted cash balance of
approximately $168,000. The Company's current assets at March 31, 1997
totalled approximately $1,750,000 and its current liabilities totalled
approximately $1,203,000, resulting in net working capital of approximately
$547,000, a current ratio of approximately 1.45 to one.
Effective January 31, 1997 the Company has borrowed $1,000,000 from a bank,
due on January 31, 1998. The loan was initially collateralized by invested
cash balances. The bank agreed to allow substitution of $800,000 of mortgage
notes receivable as collateral for $400,000 of the loan and subsequent to
January 31, 1997 the Company did substitute collateral for approximately
$380,000 of the $400,000 portion of the note payable to the bank. The bank
has also agreed in principal that it will allow substitution of other
collateral for the remaining $600,000 loan balance, subject to the banks
approval and acceptance of the replacement collateral. The Company's
President has personally guaranteed the total loan balance as required by the
terms of the bank loan agreement. The Company intends to use the proceeds of
the bank loan to supplement its cash resources for investments in real estate
foreclosure certificates of purchase, contingent upon the bank accepting the
certificates of purchase, real estate owned, investments in mortgage loans,
or other assets as substitute collateral. The interest rate on the $400,000
portion of the note is one percent over the bank's prime rate, with the rate
at closing of the note equal to 9.25%. The interest rate on the remaining
$600,000 is at 3% over the rate of interest paid on the invested cash in the
bank, resulting in an interest rate of approximately 8% at January 31, 1997
on the $600,000. The bank charged an annual loan fee of 1% on the loan. The
Company's President assigned a life insurance policy with a $500,000 death
benefit as additional collateral for the loan.
Combined stockholders' equity totalled approximately $2,150,000 at October
31, 1996.
At October 31, 1995, the Company's cash balance was approximately $300,000.
The Company's current assets at October 31, 1995 totalled approximately
$312,000 and its current liabilities totalled approximately $49,000, resulting
in net working capital of $263,000, a current ratio of approximately six to
one.
Stockholders' equity totalled approximately $1,500,000 at October 31, 1995.
The increase in stockholders' equity from 1995 to 1996 was approximately
$576,000 which resulted from the net income of approximately $127,000 plus
issuances of new common stock of approximately $449,000.
Management has not made any commitments which will require any material
financial resources in excess of resources now available to the Company.
8
<PAGE>
The fiscal year end of the combined company will be June 30.
ITEM 3. DESCRIPTION OF PROPERTY
(Item 102 of Regulation S-B)
(a) PRIME and RMPC currently use minimal office space and facilities provided
at no cost by the Company's President.
(b) PRIME and its subsidiaries invest in real estate and real estate mortgages
primarily for rental and interest income. By investing in real estate that
provides current income plus the opportunity of long-term capital gains, the
Company is attempting to realize reasonable current operating income plus a
potential hedge against long-term inflation. Historically residential real
estate values have appreciated at least equal to the inflation rate, but there
can be no assurance of future appreciation. The Company has no limitations or
policies on the percentage of assets which may be invested in any one
investment, or type of investment.
(1) The Company may invest in any type of real estate but currently
principally has investments in residential rental houses. The Company also
owns one residential condominium and thirteen residential lots. The Company
engages independent property management companies to manage the rental
properties. The property management companies find tenants, collect the rent
and pay certain expenses on the Company's behalf and remit net rent monthly
to the Company. The Company has financed its real estate acquisitions with
its own capital plus assumption of existing loans on properties or owner
carry back loans on properties. The Company has no limitation policy on the
number or amount of mortgages which may be placed on any one piece of
property. Appropriateness of real estate investments and related financing
decisions are determined by the officers of the Company.
(2) The Company's investments in mortgage loans are principally loans
carried back on properties sold. Management has no current plans to actively
invest in mortgage loans other than those related to properties sold by the
Company. The Company has and may continue to provide carry back loans on
properties equal to 100% of the sales price of properties if adequate
additional collateral is provided.
(3) The Company currently has no investments and no plans to invest in
securities of or interests in persons primarily engaged in real estate
activities.
(c) As of October 31, 1996, the Company had no single investments in real
estate which amounted to ten percent or more of the total assets of the
Company. During November 1996, the Company obtained title to an 18,500
square foot health club/racquetball court facility in Orange County,
California by foreclosing on a first mortgage loan contributed to the Company
by a shareholder in exchange for additional common stock of PRIME. The
principal balance, plus accrued interest, plus related expenses totalled
approximately $550,000 at the time of the foreclosure sale. The Company now
owns the building located on ground, subject to a land lease with
approximately 39 years remaining. Monthly ground lease payments approximate
$2,500. The property has one tenant that occupies the total facility, with a
9
<PAGE>
ten year lease which commenced in October, 1996. Monthly triple net lease
payments start at approximately $7,200 and increase to approximately $9,000
over the ten year term. The tenants have an option to renew the lease for an
additional ten year period at the market rate, but not less than approximately
$9,000 per month. The current annual triple net lease rate is approximately
$5.00 per square foot. The Company is depreciating its investment in this
facility over the 39 year land lease term on a straight-line basis. The
federal income tax basis is approximately $550,000. Real estate taxes on this
property are approximately $8,400 annually which amount to approximately 1.5%
of the $550,000 cost basis. The Company has no plans to renovate or improve
this property. The tenant has incurred approximately $100,000 related to
tenant improvements on this property. There are numerous other health club/
racquetball facilities in Orange County, California, and numerous properties
which are not now being used as this type of facility, but could be converted
to this use. As such, should the tenant vacate the property or fail to pay
rent, the Company could have difficulty in finding another tenant. Management
believes that the property has adequate insurance coverage. This property is
free and clear with no mortgage on it.
In addition to the Company's investment in the health club/racquetball
facility, the Company has approximately $1,036,000 invested in other real
estate. Generally summarized as follows:
<TABLE>
<CAPTION>
Description
-----------
<S> <C>
Nine rental homes located in the suburban Phoenix,
Arizona metropolitan area. $ 717,000
One rental residential condominium located in
Phoenix, Arizona 30,000
Three acres of land with a rental home on the property
located in Oakhurst, California, near Yosemite National
Park. This property is zoned for multiple family
housing. 160,000
One rental home located in Fairfield Bay, Arkansas 40,000
Seventeen residential lots located in Nebraska,
Arkansas, Texas, Florida and North Dakota 89,000
---------
$1,036,000
=========
</TABLE>
All of the above properties are free and clear of encumbrances other than the
nine rental homes located in the Phoenix metropolitan area. Mortgage loans
on these nine properties total approximately $595,000 with a weighted average
interest rate of approximately 9.5% per annum and are being amortized over
thirty year terms. The average remaining term of the mortgage loans is
approximately 20 years. All of the loans on these properties are fully
assumable, non qualifying FHA or VA loans. All of the rental houses have
annual leases. There are no options or contracts related to the sale of any
10
<PAGE>
of the properties owned by the Company. There are no plans for renovation,
improvement or development of any of the properties owned. The Company
intends to hold the residential rental properties for their current income
production and also for the possibility of long-term capital gains.
Management believes that all properties have adequate insurance coverage. The
residential rental properties have had vacancies of less than 5% during the
last two years.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(Item 403 of Regulation S-B)
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The table below sets
forth all persons (including any "group," whose holdings are set forth in
Item 4(b)) who are known to the Company to be the beneficial owner of more
than five percent of the common stock, $.05 par value, of the RMPC, which is
the only class of voting securities of the Company issued and outstanding.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class
-------------------- Ownership
------------------ ---------
<S> <C> <C>
Common Stock Michael L. Schumacher(1) 210,221 shares 29
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
Common Stock Terry and Susan R. Seipelt 52,356 shares 7.29%
11330 North Scioto Avenue
Oro Valley, AZ 85737
Common Stock Duane Gomer 68,374 shares 9.52%
26332 Ganiza
Mission Viejo, CA 92692
Common Stock Ray Foster 68,206 shares 9.50%
9713 Emperor Avenue
Arcadia, CA 91006
Common Stock Ray Ellis 68,315 shares 9.51%
545 N. Trayer
Glendora, CA 91740
Common Stock Jackie Sanders 68,304 shares 9.51%
1301 Electric Avenue
Seal Beach, CA 90740
Common Stock Harold L. Morris (2) 68,767 shares 9.57%
3991 MacArthur Blvd. #100
Newport Beach, CA 92660
------------------------- -------------- -------
Total 604,543 shares 84.17%
============== =======
</TABLE>
11
<PAGE>
(b) SECURITY OWNERSHIP OF MANAGEMENT. The table below sets forth the holdings
of common stock, $.05 par value of the Company owned by the Company's
directors and executive officers.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class
-------------------- Ownership ----------
-----------------
<S> <C> <C>
Common Stock Michael L. Schumacher (1) 210,221 shares 29.27%
President and Director
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
Common Stock George A. Powell 6,681 shares 00.93%
Vice President and Director
7333 S. Fillmore Circle
Littleton, CO 80122
Common Stock Norman L. Horsfield 500 shares 00.07%
Director
2567 Wilt Road
Fallbrook, CA 92028
-------------- ------
Total 217,402 shares 30.27%
============== ======
</TABLE>
Security ownership of management as a group total 217,402 shares which is
approximately 30.27% of the total shares outstanding.
(1) Michael L. Schumacher, President and Director of RMPC and his spouse Zona
R. Schumacher are the sole beneficiaries of the Schumacher & Associates, Inc.
Money Purchase Plan & Trust which will own 206,696 shares of RMPC. Mr.
Schumacher's beneficial ownership also includes the following shares to
be owned by certain relatives of Mr. Schumacher:
<TABLE>
<CAPTION>
Owner Relationship Number of Shares
- ---------- ---------------- ------------------
<S> <C> <C>
Zona Schumacher Spouse 493
Jada Schumacher Daughter 512
Spencer Schumacher Son 512
Quinn Schumacher Son 512
Ralph and Alma Schumacher Parents 183
Roberta and Timothy Weiss Sister and her spouse 164
Constance and Gary Novak Sister and her spouse 164
Cynthia and Greg Becker Sister and her spouse 164
Katheryn and Ken Zeeb Sister-in-law and her spouse 164
Lowell and Ginett Janssen Brother-in-law and his spouse 329
Warren and Cathy Janssen Brother-in-law and his spouse 164
Rachel and Charles Paprocki Sister-in-law and her spouse 164
-----
Total 3,525
</TABLE>
12
<PAGE>
(2) Harold L. Morris individually owns 5,504 shares of RMPC. In addition,
Harold L. Morris and his spouse, Connie Morris are the sole beneficiaries of
the Harold L. Morris Profit Sharing Plan which owns 30,092 shares of RMPC.
Applegates Landing I, a Harold L. Morris family partnership owns 24,299
shares. Professional Investors, a Utah Limited Partnership, of which Mr.
Morris is a partner, owns 1,679 shares. Mr. Morris' beneficial ownership
also includes the following shares owned by certain relatives:
<TABLE>
<CAPTION>
Owner Relationship Number of Shares
- ---------- -------------- ------------------
<S> <C> <C>
Debra L. Morris Daughter 4,796
Gary A. Morris Brother 2,397
-----
Total 7,193
=====
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(Item 401 of Regulation S-B)
The Company's Board of Directors is responsible for the management of the
Company, and directors are elected to serve until the next regular meeting of
shareholders or until their successors are elected and shall qualify.
Executive officers of the Company are elected by, and serve at the discretion
of the Board of Directors. Currently, there are no formal committees of the
Board of Directors. The Company has an audit committee of the Board of
Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of RMPC are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Michael L. Schumacher 48 President and Director
George A. Powell 70 Vice President and Director
James D. Phelps 57 Secretary and Treasurer
Robert S. Benham 64 Director
Robert F. Moreland 56 Director
Norman L. Horsfield 72 Director
</TABLE>
13
<PAGE>
Michael L. Schumacher has been a director and president of RMPC since October
31, 1996. He also has been a director and president of PRIME and its
subsidiaries since inception, May 1, 1995. Mr. Schumacher was previously,
until 1995, a director and president of Universal Capital Corporation and
High Hopes, Inc., both public reporting companies . Universal Capital
Corporation was an inactive public shell and High Hopes, Inc. was a real
estate investment company while Mr. Schumacher was serving as president and
director. Mr. Schumacher is the director and President of Schumacher &
Associates, Inc., a certified public accounting firm located in Englewood,
Colorado that provides audit services, principally to public companies on a
national basis throughout the U.S.A. Mr. Schumacher is a Certified Public
Accountant, Certified Management Accountant and an Accredited Financial
Planning Specialist. Mr. Schumacher has a bachelors degree in Business
Administration with a major in accounting from the University of Nebraska at
Kearney and a Masters in Business Administration from the University of
Colorado.
George A. Powell has been a director and vice president of RMPC since October,
1996. He also has been a director and vice president of PRIME and its
subsidiaries since October, 1996. Mr. Powell was previously a director and
president of Continental Investors Life, Inc., a public reporting insurance
company. Since Mr. Powell's retirement from the insurance business in 1988,
he has been self-employed as a business consultant.
James D. Phelps has been secretary and treasurer of RMPC since September 8,
1992. Mr. Phelps also serves as a board member on the City of Englewood
Police Pension Board. Mr. Phelps is temporarily serving as president-
treasurer of Mountain Specialists Limited and for the past ten years has been
self employed as a consultant/accountant for various clients in the Denver
metropolitan area.
Robert S. Benham has been a director of RMPC since October, 1996. Until 1994,
Mr. Benham served as a receiver for the State of Colorado, Division of
Insurance, for various insurance company receivership and liquidation
proceedings. Mr. Benham is currently a director and president of Robert S.
Benham & Associates, Inc. (DBA Bookworld, Inc.) in the rare and collectible
book business in Aurora, Colorado. Mr. Benham has a bachelors degree in
accounting and finance from the University of Denver. Mr. Benham previously
was a licensed real estate broker.
Robert F. Moreland has been a director of RMPC for eight years. Mr. Moreland
was also president of RMPC from 1992 through October, 1996. Mr. Moreland is
currently employed by the State of Texas General Land Office. Mr. Moreland
is a graduate of Louisiana State University and Southern Methodist University
School of Law, and is a member of the Colorado and Texas state bars.
Norman L. Horsfield has been a director of RMPC for more than 15 years. Mr.
14
<PAGE>
Horsfield has a degree from England in Electrical Engineering and has retired
as an electrical engineer with English Electric Corporation.
SIGNIFICANT EMPLOYEES
The Company has no employees. Michael L. Schumacher, President, George A.
Powell, Vice President, and James D. Phelps, Secretary/Treasurer, devote
approximately 25%, 50% and 1%, respectively, of their time to the Company's
business. The Company's rental properties are managed by independent
management companies. Secretarial and bookkeeping services are performed by
an independent contract person.
There are no family relationships among directors or officers.
No officer or director of RMPC or PRIME currently, or during the last five
years have;
(a) had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that time.
(b) had any conviction in a criminal preceding or is being subject to a
pending criminal preceding.
(c ) is being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily limiting involvement in any type of business,
securities or banking activities.
(d) has been found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
(Item 402 of Regulation S-B)
COMPENSATION OF EXECUTIVE OFFICERS
There was no compensation paid to any officer of RMPC or PRIME other than
$2,750 paid as director fees to RMPC directors during the year ended June 30,
1996, and $2,750 paid as directors fees to RMPC directors for the four months
ended October 31, 1996 and approximately $500 per year paid to Mr. James
D. Phelps, Secretary and Treasurer of RMPC for contract accounting services.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Item 404 of Regulation S-B)
15
<PAGE>
On or about May 1, 1995, PRIME issued 301,311 shares of its common stock,
(exchanged for 550,453 shares of RMPC) for assets totalling $1,506,555,
consisting principally of real estate and mortgage notes receivable, net of
related mortgage notes payable. The real estate assets were appraised by
independent appraisers and exchanged for common stock at appraised value which
approximated historical cost. Mortgage notes receivable were valued at the
unpaid principal balances plus accrued interest, not to exceed the value of
the underlying real estate collateral. Approximately one half of the shares
were issued to Michael L. Schumacher and one half to Harold L. Morris.
During the year ended October 31, 1996, PRIME issued 80,682 shares of its
common stock (exchanged for 146,902 shares of RMPC) for mortgage notes
receivable valued at $442,268 determined by the unpaid principal balances
plus accrued interest, not to exceed the value of the underlying real estate
collateral. Approximately 11% of these shares were issued to Michael L.
Schumacher and approximately 89% were issued to Harold L. Morris.
Michael L. Schumacher is a director and president and George A. Powell is a
director and vice president of PRIME and RMPC. PRIDE, a wholly-owned
subsidiary owned approximately 40% of the outstanding common stock and 100% of
the outstanding preferred stock of RMPC prior to the business combination.
Prior to the business combination, Michael L. Schumacher owned approximately
30% of PRIME. Terry and Susan Seipelt owned approximately 7% of PRIME.
Duane Gomer, Ray Foster, Ray Ellis, Jackie Sanders and Harold L. Morris each
owned approximately 10% of PRIME. J. Ben Trujillo owned approximately 2% of
PRIME and George A. Powell owned approximately 1% of PRIME. These nine
stockholders controlled PRIME and PRIDE through their ownership of
approximately 90%. Since PRIDE owned 40% of RMPC and was by far the single
largest stockholder of RMPC, the same nine individuals effectively controlled
RMPC. The business combination, therefore, was a transaction between two
related parties.
Effective January 6, 1997, Harold L. Morris, sold 149,370 of PRIME's common
shares to four individuals. Also, Michael L. Schumacher sold 41,986 shares
of PRIME's common stock to two individuals. These shares were sold at
approximately $5.50 per share which approximates book value of PRIME. As
consideration for these shares, the individuals signed personal non-recourse
notes collateralized by the stock. These notes bear interest at 8% per annum
with interest due annually and the principal due in three years. These
191,356 shares were exchanged for 314,736 shares of RMPC at the time of the
business combination. Mr. Morris and Mr. Schumacher believe these shares were
sold at fair market value at reasonable terms. Mr. Morris and Mr. Schumacher
sold these shares to allow individuals that have been instrumental in their
business careers to be shareholders in the company.
Mr. Morris is considered to be a promoter of the Company. All real estate
exchanged by Mr. Schumacher and Mr. Morris for stock was valued at appraised
value not to exceed historical cost. Mortgage notes receivable were valued
at the unpaid principal and interest balance not in excess of the value of
the collateral and also not in excess of historical cost.
Michael L. Schumacher from time to time makes working capital loans to the
Company. The loans are uncollateralized, bear interest at 8% per annum and
are payable on demand. As of October 31, 1996 and March 31, 1997 the
16
<PAGE>
outstanding balances payable to Mr. Schumacher were $119,700 and $150,000
respectively.
As summarized in "Item 4. Security Ownership of Certain Beneficial Owners and
Management", Mr. Schumacher and Mr. Morris have beneficial ownership of shares
of the Company through their pension plans and various family partnerships.
Due to their control and beneficial ownership of these entities, transactions
referred to above include transactions with these entities.
As described in "Part II, Item 4. Recent Sales of Unregistered Securities",
certain shares of PRIME's common stock were issued in trust for the benefit of
Universal Capital Corporation shareholders. While Mr. Schumacher was not a
stockholder of Universal Capital Corporation, he was previously a director and
President of Universal Capital Corporation.
ITEM 8. DESCRIPTION OF SECURITIES
(Item 202 of Regulation S-B)
RMPC has two classes of securities authorized. The Company's Articles of
Incorporation authorized it to issue 100,000,000 shares of common stock, $.05
par value, and 200,000 shares of 6% preferred stock, $25.00 par value. As of
April 30, 1997, a total of 718,226 common shares were issued and outstanding,
held of record by approximately 450 shareholders. There are no outstanding
options, warrants or calls to purchase any of the authorized securities of the
Company.
No share of Common Stock is entitled to preference over any other share and
each share of Common Stock is equal to any other share in all respects. The
holders of Common Stock are entitled to one vote for each share held of record
at each meeting of shareholders. In any distribution of assets, whether
voluntary or involuntary, holders are entitled to receive pro rata the assets
remaining after creditors have been paid in full and after any liquidation
preference of any other class of stock has been satisfied. The outstanding
Common Stock is fully paid and nonassessable. The Preferred Stock is entitled
to preference in liquidation over Common Stock.
The Board of Directors of the Company has the authority to issue the remaining
unissued authorized preferred shares and to fix the powers, preferences,
rights and limitations of such shares or any class or series thereof, without
shareholder approval. Persons acquiring such shares could have preferential
rights with respect to voting, liquidation, dissolution or dividends over
existing shareholders. Shares could be issued to deter or delay a takeover
or other change in control of the Company.
Holders of Common Stock have no preemptive rights to purchase additional
securities which may be offered by the Company. There is no cumulative voting
for the election of directors. Accordingly, the owners of a majority of
outstanding voting shares may elect all of the directors if they choose to do
so. All shares of Common Stock are entitled to participate equally in all
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor.
17
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
(Item 201 of Regulation S-B)
There is no public trading market for RMPC common stock.
The Company has applied for quotation of the Common Stock on the NASDAQ Small
Cap Exchange operated by the National Association of Securities Dealers, Inc.
under the symbol "RMPC" upon effectiveness of this Form 10-SB. RMPC has
approximately 718,226 shares of common stock issued and outstanding as of
April 30, 1997, which are held by approximately 450 shareholders. Of such
shares, approximately 18,226 shares, held by approximately 225 shareholders
are eligible for resale. The remaining outstanding shares will be restricted
shares under Rule 144. The Company presently has no existing stock option or
other plans nor are there any outstanding options, warrants or securities
convertible into Common Stock.
RMPC has never paid a dividend on its common stock. The Company does not
anticipate paying any dividends on its common stock in the foreseeable future.
Management anticipates that earnings, if any, will be retained to fund the
Company's working capital needs and the expansion of its business. The
payment of any dividends is in the discretion of the Board of Directors.
ITEM 2. LEGAL PROCEEDINGS.
(Item 103 of Regulation S-B)
RMPC is not party to any material legal proceeding, nor is the Company's
property the subject of any material legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(Item 304 of Regulation S-B)
The Company's principal independent accountant has not resigned (nor declined
to stand for re-election) and was not dismissed during the Company's two most
recent fiscal years or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(Item 701 of Regulation S-B)
During the last three years, RMPC has issued the following securities that
were not registered under the Securities Act of 1933, as amended (the "Act"):
1. During November 1996, RMPC issued 12,000 shares (post split shares)
of its common stock to PRIDE for nine residential lots valued at $28,000.
According to the terms of the business combination agreement, these
shares will be cancelled upon consummation of the combination.
18
<PAGE>
2. During November 1996, RMPC issued 32,000 shares of $25.00 par value,
6% cumulative preferred stock to PRIDE for approximately $800,000 of
mortgage notes receivable. According to the terms of the business
combination agreement, these shares will be cancelled upon consummation
of the combination.
The foregoing transactions were exempt under Section 4(2) of the Securities
Act of 1933 as being transactions not involving a public distribution. The
purchaser was very familiar with the business of RMPC and did not need the
protections afforded by a 1933 Act Registration Statement in connection with
the purchases.
See "Item I. Organization" for discussion of the acquisition by RMPC of PRIME
and the claimed exemptions for the issuance of RMPC's common stock in
connection with that acquisition.
The outstanding shares of PRIME were issued as follows: Michael L. Schumacher
and Harold L. Morris, the two initial shareholders of PRIME transferred real
estate and mortgage notes collateralized by liens on real estate having an
approximate value and historical cost of $1,507,000 in the aggregate to PRIME
in exchange for 301,311 shares on or about May 1, 1995. On or about October
31, 1996, 728 common restricted shares of PRIME were issued to Michael L.
Schumacher for $4,000 cash. Also on or about October 31, 1996, 450 shares of
PRIME restricted common shares were issued to an independent consultant for
services valued at $2,475. Also on or about October 31, 1996, 9,550
restricted common shares were issued to Michael L. Schumacher in exchange for
a mortgage note receivable in the amount of $51,042. Also, on or about
October 31, 1996, 71,132 shares were issued in exchange for a mortgage note
receivable with a balance due of $391,226, collateralized by real estate.
This note was in default and subsequent to October 31, 1996 the Company
obtained title to the property through foreclosure proceedings. On or about
May 1, 1995 Universal Capital Corporation contributed $210,000 in cash to
PRIME in exchange for 42,000 restricted common shares held in trust for
shareholders of Universal Capital Corporation. Michael L. Schumacher and
Harold L. Morris transferred 191,356 shares of PRIME to six business
associates of theirs in consideration for approximately $1,050,000 in the
form of promissory notes. The foregoing transactions were exempt under
Section 4(2) of the Securities Act of 1933 as being transactions not involving
a public distribution. Each of the purchasers was very familiar with the
business of PRIME and did not need the protections afforded by a 1933 Act
Registration Statement in connection with their respective purchases. During
December 1996, shareholders Michael L. Schumacher and Harold L. Morris made
transfers of a nominal amount of shares of PRIME from their personal holdings
to approximately 150 persons for no consideration. Most of these transferees
are long standing business associates and friends of those shareholders or
members of their extended families. These transactions did not involve a sale
of securities.
There were no underwriting commissions or discounts with respect to the sales
of unregistered securities identified above.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(Item 702 of Regulation S-B)
19
<PAGE>
The Company's Restated Articles of Incorporation limit the liability of its
officers, directors, agents, fiduciaries and employees to the fullest extent
permitted by the Colorado Revised Statutes. Specifically, directors of the
Company will not be personally liable to the Company or any of its
shareholders for monetary damages for breach of fiduciary duty as directors,
except liability for (I) any breach of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
voting for or assenting to a distribution in violation of Colorado Revised
Statutes S 7-106-401 or the articles of incorporation if it is established
that the director did not perform his duties in compliance with Colorado
Revised Statutes S 7-108-401, provided that the personal liability of a
director in this circumstance shall be limited to the amount of distribution
which exceeds what could have been distributed without violation of Colorado
Revised Statutes S 7-106-401 or the articles of incorporation; or (iv) any
transaction from which the director directly or indirectly derives an
improper personal benefit. Nothing contained in the provisions will be
construed to deprive any director of his right to all defenses ordinarily
available to the director nor will anything herein be construed to deprive
any director of any right he may have for contribution from any other director
or other person.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company is
aware that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
20
<PAGE>
PART F/S
ITEM 1. INDEX TO FINANCIAL STATEMENTS
Description Period Page
- ----------- ------ ----
Rocky Mountain Power Co. and Consolidated
Subsidiaries, Inc. (Unaudited) March 31, 1997 F-1
Rocky Mountain Power Co. (Unaudited) March 31, 1997 F-15
Rocky Mountain Power Co. June 30, 1996 F-26
Prime Rate Investment Management
Enterprises, Inc. October 31, 1996 F-35
21
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
FINANCIAL STATEMENTS
March 31, 1996 and 1997
(Unaudited)
Consolidated Financial Statements:
Consolidated Balance Sheet F-2
Consolidated Statement of Income F-3
Consolidated Statement of Changes in F-4
Stockholders' Equity
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
F-1
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1997
ASSETS
------
<S> <C>
Current Assets:
Cash $ 157,749
Cash, restricted 600,000
Certificates of purchase, real estate
foreclosures 852,274
Mortgage notes receivable, current portion 100,970
Other 38,670
---------
Total Current Assets 1,749,663
Real estate, net of accumulated
depreciation of $28,911 1,586,129
Mortgage notes receivable, net of
current portion 666,255
Other assets 52,995
---------
TOTAL ASSETS $ 4,055,042
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 20,447
Mortgage notes payable, current portion 18,500
Note payable, related party 150,000
Notes payable, bank 1,000,000
Income taxes payable 5,670
Deferred taxes payable, current portion 7,696
Other 900
---------
Total Current Liabilities 1,203,213
Minority interest in equity of
consolidated subsidiary 136,251
Deferred taxes payable,long term 27,439
Mortgage notes payable, net of current portion 622,633
---------
TOTAL LIABILITIES 1,989,536
Stockholders' Equity:
Preferred stock, $25.00 par value 200,000
shares authorized, none issued and outstanding -
Common stock, $.05 par value 100,000,000
shares authorized, 673,808 shares issued
and outstanding 33,690
Additional paid-in capital 1,843,083
Retained earnings 188,733
---------
TOTAL STOCKHOLDERS' EQUITY 2,065,506
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,055,042
==========
</TABLE>
The accompaning notes are an integral part of the financial statements.
F-2
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Five Months Ended
March 31, March 31,
1996 1997
---------- -----------
<S> <C> <C>
Revenue:
Rent income $ 85,841 $ 80,236
Interest income 13,597 41,009
Other income 900 7,991
------- -------
100,338 129,236
------- -------
Expenses:
Depreciation 13,146 12,173
Interest 28,776 27,295
Real estate taxes and insurance 7,331 5,547
Repairs and maintenance 4,233 3,319
Utilities and other 22,235 27,979
------- -------
75,721 76,313
------- -------
Net income before provision
for income taxes 24,617 52,923
Provision for income taxes 4,739 5,670
-------- -------
Net income $ 19,878 $ 47,253
======== =======
Per Share $ .03 $ .07
======== =======
Weighted Average Shares
Outstanding $ 655,582 $ 673,808
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
From November 1, 1996 through March 31, 1997
Additional
Common Paid-in Retained
No./Shares Stock Amount Capital Earnings Total
---------- ------------ ---------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance at
November 1,
1996 655,582 $ 32,779 $ 1,789,469 $ 141,480 $ 1,963,728
Additional
paid-in
capital from
reverse
acquisition/
business
combination 18,226 911 53,614 - 54,525
Net income
for the
period
November 1,
1996
through
March 31,
1997 - - - 47,253 47,253
-------- -------- -------- ------- -------
Balance at
March 31,
1997 673,808 $ 33,690 $ 1,843,083 $188,733 $2,065,506
======== ======= ========= ======= =========
</TABLE>
F-4
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Five Months Ended
March 31,
1996 1997
--------- ---------
<S> <C> <C>
Cash Flows Operating Activities:
Net income 19,878 47,253
Depreciation 13,146 12,173
Increase(decrease) in income taxes payable 637 (17,719)
(Decrease) in deferred income taxes
payable - (4,860)
(Decrease) in accounts payable and
accrued expenses (14,812) (25,491)
Other (339) (11,337)
------ ------
Net Cash Provided by Operating Activities 18,510 19
------ ------
Cash Flows from Investing Activities:
(Investment) in restricted cash - (600,000)
(Investments) in certificates of purchase - (852,274)
Proceeds from redemptions of certificates
of purchase - 372,074
Collection of notes receivable 3,905 185,935
(Acquisition) of real estate (38,093) -
Other - (29,419)
------ ------
Net Cash Provided by (Used in)
Investing Activities (34,188) (923,684)
------ -------
Cash Flows from Financing Activities:
Proceeds from bank notes payable - 1,000,000
Additional paid-in capital - 11,849
(Repayment of) mortgage notes payable (12,255) 5,345
(Repayment of) loan from related party - (119,700)
Loan from related party - 150,000
------ -------
Net Cash Provided by Financing
Activities (12,255) 1,047,494
------ ---------
Increase (decrease) in Cash (27,933) 123,829
Cash, Beginning of Period 303,374 33,920
------- --------
Cash, End of Period $ 275,441 $ 157,749
======= ========
Interest Paid $ 28,776 $ 27,295
======= ========
Income Taxes Paid $ 3,461 $ 23,389
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(1) Summary of Accounting Policies
------------------------------
This summary of significant accounting policies of Rocky
Mountain Power Co. (RMPC) and its 93.65% owned subsidiary,
Prime Rate Investment Management Enterprises, Inc. (PRIME) and
PRIME's wholly-owned subsidiary, Prime Rate Income & Dividend
Enterprises, Inc. (PRIDE) and Birch Branch, Inc., a wholly-owned
subsidiary of PRIDE is presented to assist in understanding the
Company's financial statements. The financial statements and notes
are representations of the Company's management who is responsible
for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
(a) Organization and Principles of Consolidation
--------------------------------------------
The consolidated financial statements include the accounts
of RMPC, its 93.65% owned subsidiary PRIME, PRIME's
wholly-owned subsidiary PRIDE and Birch Branch, Inc. a
wholly-owned subsidiary of PRIDE. The Company is
principally in the real estate ownership and rental
business. The Company also invests in mortgage notes
receivable and certificates of purchase related to real
estate foreclosures. All intercompany account balances
have been eliminated in the consolidation. The 6.35%
minority interest in PRIME totalling $136,251 has been
shown as a liability in the consolidated balance sheet as
of March 31, 1997. The Company has selected June 30 as
its year end.
During November 1996, PRIDE exchanged its investment in
nine residential lots for approximately 40% ownership of
RMPC. Also during November 1996, PRIDE exchanged
investments in mortgage notes receivable in the
approximate principal amount of $800,000 for preferred
stock of RMPC. The preferred stock in the approximate
amount of $800,000 had a cumulative dividend rate of 6%
per annum. As a part of the business combination
agreement, these common and preferred shares were
cancelled effective March 31, 1997.
F-6
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(1) Summary of Accounting Policies, Continued
-----------------------------------------
(a) Organization and Principles of Consolidation, Cont.
---------------------------------------------------
Effective March 31, 1996, PRIME became a 93.65% owned
subsidiary of RMPC through the issuance of 655,582 common
shares of RMPC. The business combination agreement was
accounted for as a reverse acquisition since former
controlling shareholders of PRIME own approximately 97%
of RMPC after the combination. The net monetary assets
of RMPC at March 31, 1997 totaling approximately
$54,525 have been accounted for as additional paid-in
capital in the accompanying financial statements. For
comparative purposes the statements of income and changes
in stockholders' equity for PRIME and consolidated
subsidiaries has been presented for the five month period
ended March 31, 1997. RMPC was an inactive shell
corporation during the five month periods ended March 31,
1996 and 1997.
(b) Per Share Information
---------------------
Per share information is based upon the weighted average
number of shares outstanding during the period.
(c) Investment in Real Estate and Related Depreciation
--------------------------------------------------
The Company's investments in rental real estate are
carried at cost, net of accumulated depreciation. Real
estate owned consists principally of single family and
condominium residential residences located principally in
Colorado, Arizona and California. Real estate also
includes the Company's investment in a health club/
racquetball building as further described in Note 3.
Deprecation is being computed using the straight-line
method over estimated useful lives of 40 years.
Depreciation on the health club/racquetball facility is
being computed over 39 years, the remaining term of the
underlying ground lease. Major renovations are
capitalized. Repairs and maintenance costs are expensed
as incurred.
F-7
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(1) Summary of Accounting Policies, Continued
-----------------------------------------
(d) Use of Estimates in the Preparation of Financial
------------------------------------------------
Statements
----------
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
(e) Geographic Area of Operations and Interest Rates
------------------------------------------------
The Company owns properties principally in Colorado,
California, Arkansas and Arizona. The potential for
severe financial impact can result from negative effects
of economic conditions within the market or geographic
area. Since the Company's business is principally in four
areas, this concentration of operations results in an
associated risk and uncertainty.
(f) Provision for Deferred Income Taxes
-----------------------------------
Timing differences exist related to recognition of gains
on sale of real estate for income tax purposes and
financial reporting purposes. Income tax regulations
allow the use of the installment method for reporting
sales of assets. The Company has provided a deferred
income tax provision for this timing difference.
(g) Unaudited Financial Statements
------------------------------
The balance sheet as of March 31, 1997, the statements of
income and cash flows for the five month periods ended
March 31, 1996 and 1997, and the statement of changes in
stockholders' equity for the five month period ended March
31, 1997, have been prepared by management without audit.
In the opinion of management all adjustments (which
included only normal recurring adjustments) necessary
present fairly the financial position, results of
operations and changes in financial position at March 31,
1997 and for all periods presented have been made.
F-8
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(2) Notes Payable
-------------
As of March 31, 1997 the Company had outstanding $641,133 of
mortgage notes payable collateralized by certain real estate.
Monthly payments, including principal and interest at rates
ranging from 8.5% to 15%, total approximately $6,800.
Maturities of notes payable are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Seven months ending March 31,
1997 $ 11,425
Year ending March 31,
1998 19,507
1999 21,952
2000 24,720
2001 27,855
Thereafter 535,674
-------
Total $ 641,133
=======
</TABLE>
(3) Concentration of Credit Risk
----------------------------
The Company's material concentration of credit risk consists
principally of investments in mortgage loans and certificates
of purchase. The Company's investments in mortgage loans are
collateralized principally by first deeds of trust in real
estate located primarily in Colorado and California. At March
31, 1997, the Company had six mortgage loans receivable from
one individual totalling approximately $346,000. The loans as
a percentage of value are approximately 90%. The Company also
had eleven mortgage loans receivable from another individual
totalling approximately $349,000. The second individual's
loans as a percentage of value are approximately 100% but, as
additional collateral for the loans receivable from this
individual, the Company has a junior lien on another property
owned by this individual. The weighted average interest rate
on mortgagee notes receivable is approximately 8% per annum
with monthly repayment terms being amortized over periods up to
fifteen years.
The Company has nine investments in foreclosure certificates of
purchase totalling $852,274 as of March 31, 1997. These
certificates of purchase entitle the Company to receive
interest at the original foreclosed mortgage loan rate over the
redemption period, which is generally 75 days, or title to the
property if not redeemed within the redemption period.
Interest rates on the Company's investment in certificates of
purchase range between 7% and 11%.
F-9
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(3) Concentration of Credit Risk, Continued
---------------------------------------
As of October 31, 1996, the Company had an investment in a
first mortgage note receivable with a health club/racquetball
building as collateral. As of October 31, 1996, the note was
in default and the Company was in the process of foreclosing on
the property. During November, 1996, the Company obtained
title to this property at the foreclosure sale. The
approximate $550,000 carrying value of this note represented
the unpaid principal balance of the note plus costs incurred
related to the property during the foreclosure period. This
property is located in Orange county, California and is on land
that is leased under a long-term ground lease with
approximately 39 years remaining. The ground lease payments
are currently approximately $2,500 per month with provisions
for future inflationary increases. The building is leased to
a tenant under a ten year triple net lease that became effected
in March 1996. Rent under the terms of the lease amount to
approximately $7,200 per month for October, November and
December 1996, then increasing in January 1997, with various
increases throughout the ten year lease period with the monthly
rent approximately $9,000 in the tenth year. The tenants have
an option to renew the lease for an additional ten year period
at fair market value, but not less than approximately $9,000
per month. The lease is a net lease with the tenants being
required to pay all expenses related to the building. This
building was contributed to the Company by a stockholder of
the Company in exchange for 71,132 shares of the Company's
common stock, totalling $391,226, equaling the principal and
accrued interest on the note at the time of exchange. The
difference between the $391,226 exchange value of the property
and the $550,000 relates to additional costs related to this
property incurred by the Company during the foreclosure period.
Included in accounts payable and the carrying value of the note
are $24,000 of costs incurred by the tenant related to property
improvements. The Company has agreed to reduce the rent by
$2,000 per month for 12 months to compensate the tenant for the
$24,000 property improvement costs incurred. During November
1996, the Company obtained title to this property at the
foreclosure sale and as of March 31, 1997 is carrying its
investment in the property at approximately $550,000. The
Company is depreciating this property on a straight-line basis
over the remaining 39 year term of the ground lease.
Management has reviewed the carrying value and has determined
that the terms of the lease are sufficient to recover the cost
of the property.
F-10
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(4) Note Payable, Related Party
---------------------------
As of March 31, 1997, a related party had loaned $150,000 to
the Company. This balance is payable on demand and bears
interest at the rate of 8% per annum. This loan is
uncollateralized.
(5) Fair Value Financial Instruments
--------------------------------
As of March 31, 1997, the Company had various investments in
long term mortgage notes receivable and was obligated under
various mortgage notes payable. Management believes that the
fair value of these financial instruments does not materially
differ from the carrying value of these notes based upon
discounting at current market rates of interest.
(6) Income Taxes
------------
A reconciliation between the expected income tax provision
computed at a federal statutory rate of 34% and the actual
income tax provision follows:
<TABLE>
<CAPTION>
Five Months Ended
March 31,
1996 1997
--------- ----------
<S> <C> <C>
Expected income tax $ 8,370 $ 19,082
Graduated tax brackets (4,682) (10,664)
Benefit of utilization of
net operating loss carryover - (4,480)
State tax net of federal benefit 1,051 1,732
-------- --------
$ 4,739 $ 5,670
======== ========
</TABLE>
The tax effects of temporary differences that give rise to the
deferred tax liability at March 31, 1997 follow:
<TABLE>
<CAPTION>
<S> <C>
Installment sale reporting $ 35,135
less current portion (7,696)
--------
$ 27,439
========
</TABLE>
The change in the deferred tax liability during the five month
period ended March 31,1997 was a decrease of $4,860.
F-11
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(7) Notes Payable, Bank
-------------------
Effective January 31, 1997 the Company borrowed $1,000,000 from
a bank. At the time of closing of the loan, all proceeds were
deposited into an interest bearing account in the bank. The
total $1,000,000 of interest bearing bank account balances at
January 31, 1997 was collateral for the loan. Of this amount,
$400,000 is also collateralized by the Company's mortgage notes
receivable. The interest rate on the $400,000 portion of the
loan is a floating rate equal to 1% over the bank's prime rate.
During February and March, 1997 the Company replaced the
collateral for this $400,000 with foreclosure certificates of
purchase. The bank has agreed to continue to allow
certificates of purchase as collateral for the $400,000 portion
of the loan during the loan period. The Company paid a $4,000
loan fee related to this portion of the loan.
The remaining $600,000 of the notes payable is collateralized
by the interest bearing bank account. The bank has agreed to
allow substitution of other collateral for the balance of this
loan, solely and subject to approval and acceptance of the
replacement collateral by the bank. The interest rate on the
$600,000 portion of the loan is equal to 3% over the rate of
interest paid on the interest bearing bank accounts used as
collateral. The Company has agreed to pay a loan fee in the
amount of $1,500 per each three month period that the loan is
outstanding. The total principal balance of the notes payable
to the bank is due January 31, 1998.
The Company's President has personally guaranteed the total
$1,000,000 balance of the notes payable and has assigned to the
bank a life insurance policy with a $500,000 death benefit as
additional collateral.
The Company has agreed to provide annual audited financial
statements to the bank. The terms of the loan agreement
require that the Company maintain a debt to tangible net worth
ratio not to exceed one to one, a debt service coverage ratio
of greater than 1.25 to one and a current ratio of greater than
one to one.
(8) Subsequent Event
----------------
Effective April 30, 1997, PRIME was merged into RMPC with RMPC
being the surviving entity. This merger was pursuant to
Section #7-11-104 of the Colorado Business Corporation Act
F-12
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and March 31, 1997
(Unaudited)
(8) Subsequent Event, Continued
---------------------------
which authorizes a merger of a parent and subsidiary without
vote of shareholders of either company if the parent holds at
least 90% of the outstanding shares of the subsidiary. In
exchange for the 6.35% minority interest amounting to $136,251,
44,418 shares of RMPC restricted common stock were issued.
The following proforma balance sheet gives effect to the
subsequent merger of PRIME into RMPC and the issuance of 44,418
shares of RMPC restricted common stock for the $136,251
minority interest in PRIME, as if the merger had taken place on
March 31, 1997:
F-13
<PAGE>
PROFORMA BALANCE SHEET
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31, 1997
(Unaudited)
RMPC Pro Forma
Consolidated Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Current Assets $ 1,749,663 $ - $ 1,749,663
Other Assets 2,305,379 - 2,305,379
--------- ---------- ---------
Total Assets $ 4,055,042 $ - $ 4,055,042
========= ========== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Liabilities:
Current Liabilities $ 1,203,213 $ - $ 1,203,213
Other Liabilities 650,072 - 650,072
--------- ---------- ---------
Total Liabilities 1,853,285 - 1,853,285
--------- ---------- ---------
Minority interest in
equity of consolidated
subsidiary 136,251 (A)(136,251) -
--------- ---------- ---------
Stockholders' Equity:
Preferred stock - - -
Common stock, $.05 par
value, 100,000 shares
authorized, 718,226
issued and outstanding
after merger 33,690 (A) 2,221 35,911
Additional paid-in
capital 1,843,083 (A) 134,030 1,977,113
Retained earnings 188,733 - 188,733
--------- ---------- ---------
Total Stockholders' Equity 2,065,506 136,251 2,201,757
--------- ---------- ---------
Total Liabilities and
Stockholders' Equity $ 4,055,042 $ - $ 4,055,042
========= ========== =========
</TABLE>
F-14
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
FINANCIAL STATEMENTS
March 31, 1996 and 1997
(Unaudited)
F-15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ROCKY MOUNTAIN POWER CO.
------------------------
(Unaudited)
Financial Statements:
Statement of Operations F-17
Statement of Changes in Stockholders'
Equity F-18
Statements of Cash Flows F-19
Notes to Financial Statements F-20
F-16
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
March 31, March 31,
1996 1997
----------- -----------
<S> <C> <C>
Revenues:
Investment income $ 839 $ 27,221
---------- ---------
839 27,221
---------- ---------
Operating Expenses:
Directors' fees and meeting expense 6,698 6,944
Legal and accounting 3,313 2,358
Office supplies and expense 31 67
Contract services - 650
---------- --------
10,042 10,019
---------- --------
Net Income (Loss) (9,203) 17,202
---------- --------
Provision for Preferred Dividends - (20,000)
---------- --------
Net (Loss) to Common Stockholders $ (9,203) $ (2,798)
========== =========
Net (Loss) Per Common Share $ (.50) $ (.09)
========== =========
Shares Outstanding $ 18,226 $ 30,226
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------- ------------------- Additional
Number of Number of Paid-in
Shares Amount Shares Amount Capital
----------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1996 1,000,000 $100,000 - - $1,020,585
Retirement of
Treasury stock (116,536) (11,654) - - (221,419)
Reverse stock
split (865,238) (87,435) - - 87,435
Issuance of
Preferred stock - - 32,000 800,000 -
Issuance of
Common stock 12,000 600 - - 35,400
Net (loss) for
the nine months
ended March 31,
1997 (unaudited) - - - - -
-------- ------- ------- ------- --------
Balance,
March 31, 1997 30,226 $ 1,511 32,000 $800,000 $ 922,001
======== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY CONT.
<TABLE>
<CAPTION>
Treasury Stock
-----------------------
Accumulated Number of
(Deficit) Shares Amount Total
------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Balance,
June 30, 1996 $ (866,535) (116,536.4) $ (233,073) $ 20,977
Retirement of
Treasury stock - 116,536.4 233,073 -
Reverse stock
split - - - -
Issuance of
Preferred stock - - - 800,000
Issuance of
Common stock - - - 36,000
Net (loss) for
the nine months
ended March 31,
1997 (unaudited) (17,202) - - (17,202)
--------- --------- ---------- --------
Balance,
March 31, 1997 $ (849,333) - $ - $ 874,179
========= ========= ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
ROCKY MOUNTAIN POWER, CO.
-------------------------
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
March 31, March 31,
1996 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (9,203) $ 17,202
(Increase) in receivable from
related party - (26,667)
-------- --------
Net Cash (Used by) operating activities (9,203) (9,465)
-------- --------
Net (Decrease) in Cash and Cash Equivalent (9,203) (9,465)
Cash and Cash Equivalents at
Beginning of Period 29,766 20,977
-------- -------
Cash and Cash Equivalents at
End of Period $ 20,563 $ 11,512
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
ROCKY MOUNTAIN POWER CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
(1) Summary of Significant Accounting Policies
------------------------------------------
This summary of significant accounting policies of Rocky
Mountain Power Co. (Company) is presented to assist in
understanding the Company's financial statements. The
financial statements and notes are representations of the
Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Organization and History
------------------------
The Company was organized on September 30, 1958, as a Colorado
corporation. The purpose of the Company was the development of
water and power resources, including a hydro-electric facility
on a tributary of the Colorado River. This project was
rendered difficult of accomplishment in 1975 as a result of the
U.S. Congress placing the reservoir site within a wilderness
area. From 1975, the Company had continued to perform due
diligence on its conditional water rights. The Company did not
file the required application for due diligence by June, 1995
and the water rights lapsed. As of March 31, 1997, prior to
completion of the business combination the Company had no
ongoing operations.
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.
Statements of Cash Flows
------------------------
For purposes of the statements of cash flows, the Company
considers investments with a three-month or less maturity to be
cash equivalents.
F-20
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
(1) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Business Combination
--------------------
The Company has completed a business combination effective
March 31, 1997.
During November, 1996 the Company increased its authorized
common stock to 100,000,000 shares and changed the par value
from $.10 to $.05 per share and reverse split its common stock
on a one for fifty basis, with each shareholder retaining a
minimum of ten shares after the reverse split. The Company
also authorized 200,000 shares of $25.00 par value, 6%
cumulative preferred stock.
The Company has issued 600,000 common shares (post split 12,000
shares) and 32,000 preferred shares to Prime Rate Income and
Dividend Enterprises, Inc. (PRIDE), a wholly-owned subsidiary
of Prime Rate Investment Management Enterprises, Inc. (PRIME).
The common shares were issued in exchange for nine residential
lots valued at approximately $36,000 and the preferred shares
were issued in exchange for approximately $800,000 of mortgage
notes receivable with weighted average interest rates of
approximately 8%. These newly issued common and preferred
shares were cancelled effective March 31, 1997 under the terms
of the business combination agreement with PRIME.
According to the terms of the business combination with PRIME
effective March 31, 1997, the new common and preferred shares
were cancelled, the Company issued 655,582 new common shares
for the acquisition of approximately 93.65% of PRIME, a
Colorado corporation principally in the real estate business.
The financial statements of Rocky Mountain Power Co. For the
nine month period ended March 31, 1997 have been prepared to
include transactions up to but not inclusive of the business
combination. The effects of the business combination agreement
are included in the consolidated financial statements as of
March 31, 1997.
(2) Income Taxes
------------
The Company utilizes the same methods of accounting for income
tax purposes as is utilized for financial reporting purposes.
At March 31, 1997, the Company has a net operating loss of
approximately $550,000 expiring in 2008 through 2012.
F-21
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
(2) Income Taxes, Continued
-----------------------
No deferred tax asset was reflected prior to the business
combination due to questionable future realization.
(3) Unaudited Financial Statements
------------------------------
The statements of operations and the statements of cash flows
for the nine month periods ended March 31, 1996 and 1997 have
been prepared by management without audit. In the opinion of
management all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of
operations, cash flows and changes in stockholders' equity for
the periods presented have been made.
(4) Retirement of Treasury Stock
----------------------------
During the nine month period ended March 31, 1997 the treasury
stock was retired and returned to authorized but unissued
shares.
F-22
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
June 30, 1995 and 1996
F-23
<PAGE>
CONTENTS
--------
Page
----
Report of Independent Certified Public Accountants F-25
Financial Statements:
Balance Sheets F-26
Statements of Operations F-27
Statements of Changes in Stockholders' Equity F-28
Statements of Cash Flows F-29
Notes to Financial Statements F-30
F-24
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors
Rocky Mountain Power Co.
We have audited the accompanying balance sheets of Rocky Mountain Power Co.
(a Colorado corporation) as of June 30, 1995 and 1996, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these 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 audits to
obtain reasonable assurance about whether the 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 our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rocky Mountain Power Co. as
of June 30, 1995 and 1996, and the results of its operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the entity
has the ability to continue as a going concern. As shown in the financial
statements and as described in Note 1 to the financial statements, the
Company has no continuing revenue source available to meet normal operating
expenses. These factors, as discussed in Note 1 to the financial statements,
raise doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Miller and McCollom
Certified Public Accountants
3900 E. Mexico Ave.
Suite 504
Denver, Colorado 80210
September 6, 1996
F-25
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-----------------
1995 1996
-------- --------
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 29,766 $ 20,977
-------- --------
Total Current Assets 29,766 20,977
-------- --------
TOTAL ASSETS $ 29,766 $ 20,977
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Total Current Liabilities $ - $ -
Stockholders' Equity (Note 3):
Common stock, $0.10 par value,
authorized and issued 1,000,000
shares of which 116,536.4 shares are
held in treasury and 2,400 shares have
been approved for issue from treasury
but are presently unissued June 30,
1996 and 1995 100,000 100,000
Additional paid-in capital 1,020,585 1,020,585
--------- ---------
Accumulated (deficit) (857,746) (866,535)
262,839 254,050
Treasury stock (233,073) (233,073)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 29,766 $ 20,977
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,766 $ 20,977
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Revenues:
Investment income $ 2,278 $ 1,129
Realized (loss) on investments (2,206) -
--------- -------
72 1,129
--------- -------
Operating Expenses:
Directors' fees and meeting expense 6,810 6,511
Legal and accounting 3,590 3,313
Professional fees 11,613 -
Office supplies and expense 182 94
Contract services 3,649 -
Water rights marketing (Note 5) 3,724 -
Loss from write-off of water rights
(Note 2) 445,334 -
--------- -------
474,902 9,918
--------- -------
(Loss) before Income Taxes (474,830) (8,789)
Income Taxes (Note 4) - -
-------- -------
Net (Loss) $ (474,830) $ (8,789)
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
ROCKY MOUNTAIN POWER CO.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY111
<TABLE>
<CAPTION>
Common Stock Unrealized
------------------ Additional Appreciation
Number of Paid-in (Depreciation)
Shares Amount Capital on Investments
--------- -------- ----------- ----------------
<S> <C> <C> <C> <C>
Balance,
June 30, 1994 1,000,000 $100,000 $1,010,960 $(1,891)
Reversal of li-
ability for pre-
ferred stock
called (Note 3) - - 9,625 -
Unrealized
appreciation on
investments - - - 1,891
Net (loss) for
the year ended
June 30, 1995 - - - -
----------- -------- --------- ------
Balance,
June 30, 1995 1,000,000 100,000 1,020,585 -
Net (loss) for
the year ended
June 30, 1996 - - - -
---------- -------- --------- --------
Balance,
June 30, 1996 1,000,000 $100,000 $1,020,585 $ -
========== ======== ========= ========
</TABLE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY111 CONT.
<TABLE>
<CAPTION>
Treasury Stock
-------------------------
Accumulated Number of
(Deficit) Shares Amount Total
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Balance,
June 30, 1994 $ (382,916) (116,536.4) $ (233,073) $ 493,080
Reversal of li-
ability for pre-
ferred stock
called (Note 3) - - - 9,625
Unrealized
appreciation on
investments - - - 1,891
Net (loss) for
the year ended
June 30, 1995 (474,830) - - (474,830)
--------- -------- --------- --------
Balance,
June 30, 1995 (857,746) (116,536.4) (233,073) 29,766
Net (loss) for
the year ended
June 30, 1996 (8,789) - - (8,789)
-------- -------- -------- -------
Balance,
June 30, 1996 $(866,535) (116,536.4) $(233,073) $ 20,977
======== ========= ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
1995 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (474,830) $ (8,789)
-------- ---------
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Unrealized increase on cash equivalent
fund 1,891 -
Loss from write-off of water rights 445,334 -
Decrease in prepaid expenses 2,213 -
(Decrease) in accounts payable (5,015) -
------- --------
Total adjustments 444,423 -
Net cash (used) by operating activities (30,407) (8,789)
------- -------
Net (Decrease) in Cash and Cash Equivalents (30,407) (8,789)
Cash and Cash Equivalents at Beginning of Year 60,173 29,766
------- -------
Cash and Cash Equivalents at End of Year $ 29,766 $ 20,977
======== ========
</TABLE>
Supplemental Disclosure of Non Cash Financing and
Investing Activities:
During the year ended June 30, 1995, the liability for preferred stock
called in the amount of $9,625 was reversed through an increase to paid in
capital.
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 and 1996
(1) Summary of Significant Accounting Policies
------------------------------------------
Organization and History
------------------------
Rocky Mountain Power Co. (Company) was organized on September 30, 1958,
as a Colorado corporation. The purpose of the Company was the development
of water and power resources, including a hydro-electric facility on a
tributary of the Colorado River. This project was rendered difficult of
accomplishment in 1975 as a result of the U. S. Congress placing the
reservoir site within a wilderness area. From 1975, the Company had
continued to perform due diligence on its conditional water rights. The
Company did not file the required application for due diligence by June,
1995 and the water rights lapsed. Presently the company has no ongoing
operations.
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.
Statements of Cash Flows
------------------------
For purposes of the statements of cash flows, the Company considers
investments with a three-month or less maturity to be cash equivalents.
Going Concern
-------------
At June 30, 1996, the Company's only continuing source of revenue is
interest income on invested cash. This source of revenue, together with
the cash balance at June 30, 1996, may not be sufficient to meet normal
annual operating expenses. These factors indicate that the Company may
be unable to continue as a going concern.
Management will consider additional outside investors, merger/acquisitions
options or the possible dissolution and liquidation of the company.
(2) Investment in Water Rights
--------------------------
The Company was originally decreed certain conditional water rights in
Garfield and Eagle Counties, Colorado, on the South Fork of the White
River and some tributaries. These water rights require continued due
diligence activities to maintain those rights. The Company did not file
the required application for due diligence by June, 1995, thus, the water
rights lapsed. The carrying amount of the investment in water rights was
charged against operations for the year ended June 30, 1995.
F-30
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1995 and 1996
(3) Preferred Stock
---------------
On October 1, 1988, preferred shares were called for redemption at $1.00
per share. At June 30, 1994, a liability for preferred stock called was
reflected in the amount of $9,625 representing 9,625 shares of preferred
stock still outstanding whose stockholders had not been located by the
Company. During the year ended June 30, 1995, this amount was reversed
through an increase to capital because the period of time to redeem these
shares had expired under the statute of limitations.
(4) Income Taxes
------------
The Company utilizes the same methods of accounting for income tax
purposes as is utilized for financial reporting purposes.
At June 30, 1996, the Company has a net operating loss of approximately
$556,000 expiring in 2008 through 2011. No deferred tax asset is
reflected due to questionable future realization.
(5) Water Rights Marketing
----------------------
The board of directors approved payment of a daily per diem rate and out-
of-pocket expenses to an officer of the Company for his efforts in
marketing the conditional water rights. A total of $2,324 was paid under
this arrangement during the year ended June 30, 1995.
F-31
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
Report of Independent Certified Public Accountants F-33
Consolidated Financial Statements:
Consolidated Balance Sheets F-34
Consolidated Statements of Income F-35
Consolidated Statement of Changes in F-36
Stockholders' Equity
Consolidated Statements of Cash Flows F-37
Notes to Consolidated Financial Statements F-38
F-32
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors
Prime Rate Investment Management Enterprises, Inc.
Englewood, CO 80112
We have audited the accompanying consolidated balance sheets of Prime
Rate Investment Management Enterprises, Inc. and Consolidated
Subsidiaries as of October 31, 1995 and October 31, 1996, and the related
consolidated statements of income, changes in stockholders' equity and
cash flows for the period from May 1, 1995 (date of inception) through
October 31, 1995 and for the year ended October 31, 1996. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 audits
to obtain reasonable assurance about whether the 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 financial position of Prime
Rate Investment Management Enterprises, Inc. and Consolidated
Subsidiaries as of October 31, 1995 and October 31, 1996, and the results
of its operations, changes in stockholders' equity and its cash flows for
the period from May 1, 1995 (date of inception) through October 31, 1995
and for the year ended October 31, 1996, in conformity with generally
accepted accounting principles.
Miller and McCollom
Certified Public Accountants
3900 E. Mexico Ave.
Suite 504
Denver, Colorado 80210
December 6, 1996
F-33
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
October 31, October 31,
1995 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 303,374 $ 33,920
Certificates of purchase, real estate
foreclosures (Note 4) - 372,074
Mortgage notes receivable, current
portion (Note 4) 7,436 219,318
Other 1,488 27,333
-------- --------
Total Current Assets 312,298 652,645
Real estate, net of accumulated deprec-
iation of $14,577 at October 31, 1995
and $21,758 at October 31, 1996 (Note 3) 1,735,753 1,039,057
Mortgage notes receivable, net of
current portion (Note 4) 193,221 733,842
Mortgage note receivable, in process
of foreclosure (Note 4) - 547,634
Other assets 4,300 -
-------- --------
TOTAL ASSETS $ 2,245,572 $ 2,973,178
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,100 $ 30,641
Notes payable, current portion (Note 3) 24,307 17,347
Note payable, related party (Note 7) - 119,700
Income taxes payable (Note 9) 3,461 23,389
Deferred taxes payable, current portion
(Note 9) - 7,696
Accrued expenses and other 17,873 16,197
------- -------
Total Current Liabilities 48,741 214,970
Deferred taxes payable,long term (Note 9) - 32,299
Notes payable, net of current portion (Note 3) 675,755 629,131
-------- --------
TOTAL LIABILITIES 724,496 876,400
-------- --------
Stockholders' Equity:
Preferred stock, $10.00 par value,
1,000,000 - -
shares authorized, none issued
Common stock, $1.00 par value, 10,000,000
shares authorized, 301,311 shares issued
and outstanding at October 31, 1995 and
383,171 shares at October 31, 1996
(Note 2) 301,311 383,171
Additional paid-in capital 1,205,244 1,572,127
Retained earnings 14,521 141,480
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,521,076 2,096,778
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,245,572 $ 2,973,178
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
From May
1, 1995
(date of
inception)
through Year Ended
October 31, October 31,
1995 1996
------------ ------------
<S>
Revenue: <C> <C>
Rent income $ 96,478 $ 150,707
Interest income 13,738 85,441
Gain on the sale of real estate - 100,614
Gain on the sale of stock - 5,100
------- -------
110,216 341,862
------- -------
Expenses:
Property management fees 10,663 12,813
Depreciation 14,581 23,431
Interest 36,100 66,490
Real estate taxes and insurance 11,908 17,436
Association dues 10,308 11,259
Repairs and maintenance 6,966 9,046
Utilities and other 1,708 10,403
------ -------
92,234 150,878
------ -------
Net income before provision
for income taxes 17,982 190,984
------ -------
Provision for income taxes (Note 9):
Current 3,461 24,030
Deferred - 39,995
------ -------
3,461 64,025
-------- --------
Net income $ 14,521 $ 126,959
======== ========
Per Share $ .05 $ .38
======== ========
Weighted Average Shares
Outstanding 269,577 329,797
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From May 1, 1995 (inception) through October 31, 1996
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
No./Shares Stock Amount Capital Earnings Total
---------- ------------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at May 1,
1995 - $ - $ - $ - $ -
Common stock issued 301,311 301,311 1,205,244 - 1,506,555
Net income for the
period from May 1,
1995 through
October 31, 1995 - - - 14,521 14,521
Balance at October
------- ------- --------- ------- ---------
31, 1995 301,311 301,311 1,205,244 14,521 1,521,076
Common stock issued 81,860 81,860 366,883 - 448,743
Net income for the
year ended October
31, 1996 - - - 126,959 126,959
------- -------- ---------- ------- ---------
Balance at October
31, 1996 $ 383,171 $ 383,171 $ 1,572,127 $141,480 $2,096,778
======== ========= ========== ======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From May
1, 1995
(date of
Inception)
through Year ended
October 31, October 31,
1995 1996
----------- -----------
<S> <C> <C>
Cash Flows Operating Activities:
Net income $ 14,521 $ 126,959
Depreciation 14,581 23,431
Increase in income taxes payable 3,461 19,928
Increase in deferred income taxes
payable - 39,995
Increase in accounts payable and
accrued expenses 3,794 25,865
(Gain) on sale of assets - (106,614)
-------- --------
Net Cash Provided by Operating Activities 36,357 129,564
-------- --------
Cash Flows from Investing Activities:
(Investments) in certificates of
purchase - (372,074)
Collection of notes receivable 1,149 151,964
(Investment) in mortgage notes
receivable - (155,366)
(Acquisition) of real estate - (93,316)
Other - (33,215)
--------- --------
Net Cash Provided by (Used in)
Investing Activities 1,149 (502,007)
-------- --------
Cash Flows from Financing Activities:
Common stock issued 278,000 4,000
(Repayment) of notes payable (12,132) (20,711)
Loan from related party - 119,700
-------- --------
Net Cash Provided by
Financing Activities 265,868 102,989
-------- --------
Increase (decrease) in Cash 303,374 (269,454)
Cash, Beginning of Period - 303,374
-------- --------
Cash, End of Period $ 303,374 33,920
========= ========
Interest Paid $ 41,042 $ 66,490
========= ========
Income Taxes Paid $ - $ 4,102
========= ========
</TABLE>
Note: During the period ended October 31, 1995, 245,711 shares of common
stock were issued in exchange for real estate, mortgage notes receivable and
other assets, net of related liabilities, with the net equity totalling
$1,228,555. During the year ended October 31, 1996, 80,682 shares of common
stock were issued in exchange for two mortgage notes receivable totalling
$442,268, including accrued interest. Real estate was sold in exchange for
mortgage notes receivable totalling $856,993 less a mortgage note payable of
$32,843 which was assumed.
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(1) Summary of Accounting Policies
------------------------------
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying financial
statements follows:
(a) Organization and Principles of Consolidation
--------------------------------------------
The consolidated financial statements include the accounts
of Prime Rate Investment Management Enterprises, Inc.,
(PRIME) and its wholly-owned subsidiary, Prime Rate Income
& Dividend Enterprises, Inc. (PRIDE) and Birch Branch,
Inc. a wholly-owned subsidiary of PRIDE. The Company is
principally in the real estate ownership and rental
business. The Company also invests in mortgage notes
receivable and certificates of purchase related to real
estate foreclosures. All intercompany account balances
have been eliminated in the consolidation. The Company
has selected October 31 as its year end.
(b) Per Share Information
---------------------
Per share information is based upon the weighted average
number of shares outstanding during the period.
(c) Investment in Real Estate and Related Depreciation
--------------------------------------------------
The Company's investments in rental real estate are
carried at cost, net of accumulated depreciation. Real
estate owned consists principally of single family and
condominium residential residences located principally in
Colorado, Arizona and California. Deprecation was
computed using the straight-line method over estimated
useful lives of 40 years. Major renovations are
capitalized. Repairs and maintenance costs are expensed
as incurred.
(d) Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
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
F-38
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(1) Summary of Accounting Policies, Continued
-----------------------------------------
(d) Use of Estimates in the Preparation of Financial Statements, Continued
----------------------------------------------------------------------
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
(e) Geographic Area of Operations and Interest Rates
------------------------------------------------
The Company owns properties principally in Colorado,
California, Arkansas and Arizona. The potential for
severe financial impact can result from negative effects
of economic conditions within the market or geographic
area. Since the Company's business is principally in four
areas, this concentration of operations results in an
associated risk and uncertainty.
(f) Provision for Deferred Income Taxes
-----------------------------------
Timing differences exist related to recognition of gains
on sale of real estate for income tax purposes and
financial reporting purposes. Income tax regulations
allow the use of the installment method for reporting
sales of assets. The Company has provided a deferred
income tax provision for this timing difference.
(2) Common Stock Issued
-------------------
During the year ended October 31, 1995 the Company issued
301,311 shares of restricted common stock for cash and certain
other assets totalling $1,506,555, consisting principally of
real estate and mortgage notes receivable, net of related
mortgage notes payable. The real estate assets were appraised
and exchanged for common stock at appraised value which
approximated historical cost.
Historical cost included approximately $120,000 of appraised
value in real estate exchanged for services and included in
taxable income of the former owner. Also, included in
historical cost is approximately $60,000 of gain included in
income of the previous owner as a result of liquidation of the
entity.
Included in stock issued during the period ended October 31,
1995 are 42,000 shares issued for $210,000 cash contributed by
Universal Capital Corporation for the benefit of the Universal
Capital Corporation shareholders. These 42,000 shares are
F-39
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(2) Common Stock Issued, Continued
------------------------------
held in trust by a shareholder of the Company for the benefit
of the Universal Capital Corporation stockholders and will be
distributed to them upon successful completion of a
registration statement with the U.S. Securities and Exchange
Commission, or upon the shareholders accepting unregistered
restricted shares. Seventeen shareholders representing
approximately 78% of the 42,000 shares have agreed to accept
unregistered restricted shares in lieu of receiving free
trading shares.
Included in stock issued during the year ended October 31, 1996
are 728 shares issued for $4,000 cash, 80,682 shares issued for
two mortgage notes receivable, and 450 shares issued for
consulting services valued at $2,475. The two mortgage notes
receivable were previously owned by two stockholders of the
Company and exchanged for common stock at the unpaid principal
balances plus accrued interest totalling $442,268.
(3) Note Payable
------------
As of October 31, 1996 the Company had outstanding $646,478 of
mortgage notes payable collateralized by certain real estate.
Monthly payments, including principal and interest at rates
ranging from 8.5% to 15%, total approximately $6,800.
Maturities of notes payable are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended March 31,
1997 $ 17,347
1998 19,507
1999 21,952
2000 24,720
2001 27,855
Thereafter 535,097
-------
Total $ 646,478
=======
</TABLE>
(4) Concentration of Credit Risk
----------------------------
The Company's material concentration of credit risk consists
principally of investments in mortgage loans and certificates
of purchase. The Company's investments in mortgage loans are
collateralized principally by first deeds of trust in real
F-40
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(4) Concentration of Credit Risk, Continued
---------------------------------------
estate located primarily in Colorado and California. At
October 31, 1996, the Company had seven mortgage loans
receivable from one individual totalling $412,977. The loans
as a percentage of value are approximately 90%. The Company
also had twelve mortgage loans receivable from another
individual totalling $431,220. The second individual's loans
as a percentage of value are approximately 100% but, as
additional collateral for loans receivable from this
individual, the Company has a junior lien on another property
owned by this individual.
Weighted average interest rates on mortgagee notes receivable
approximate 8% per annum with monthly repayment terms being
amortized over periods up to fifteen years.
The Company has six investments in foreclosure certificates of
purchase totalling $372,074 as of October 31, 1996. These
certificates of purchase entitle the Company to receive
interest at the original foreclosed mortgage loan rate over the
75 day redemption period or title to the property if not
redeemed within the redemption period. Interest rates on the
Company's investment in certificates of purchase range between
7.5% and 11%.
As of October 31, 1996, the Company has an investment in a
first mortgage note receivable with a health club/racquetball
building as collateral. As of October 31, 1996, the note was
in default and the Company was in the process of foreclosing on
the property. During November, 1996, the Company obtained
title to this property at the foreclosure sale. The $547,634
carrying value of this note represents the unpaid principal
balance of the note plus costs incurred related to the property
during the foreclosure period. This property is located in
Orange County, California and is on land that is leased under
a long-term ground lease with approximately 39 years remaining.
The ground lease payments are currently approximately $2,500
per month with provisions for future inflationary increases.
The building is leased to a tenant under a ten year lease that
became effected in March 1996. Rent under the terms of the
lease on a triple net basis amount to approximately $7,200 per
month for October, November and December 1996, then increasing
in January 1997, with various
F-41
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(4) Concentration of Credit Risk, Continued
---------------------------------------
increases throughout the ten year lease period with the monthly
rent approximately $9,000 in the tenth year. The tenants have
an option to renew the lease for an additional ten year period
at fair market value, but not less than approximately $9,000
per month. The lease is a net lease with the tenants being
required to pay all expenses related to the building. This
building was contributed to the Company by a stockholder of the
Company in exchange for 71,132 shares of the Company's common
stock, totalling $391,226, equaling the principal and accrued
interest on the note at the time of exchange. Included in
accounts payable and the carrying value of the note are $24,000
of costs incurred by the tenant related to property
improvements. The Company has agreed to reduce the rent by
$2,000 per month for 12 months to compensate the tenant for the
$24,000 costs incurred. During November 1996, the Company
obtained title to this property at the foreclosure sale.
Management has reviewed this investment and believes that the
terms of this lease support the carrying value of the property
at the cost of approximately $547,634.
(5) Subsequent Event
----------------
During November 1996, PRIDE exchanged its investment in nine
residential lots for approximately 40% ownership of Rocky
Mountain Power Company, Inc. (RMPC), an inactive, non-reporting
public company. RMPC's only asset is cash of approximately
$13,000. RMPC has no significant liabilities. Also during
November, 1996, the Company exchanged investments in mortgage
notes receivable in the approximate principal amount of$800,000
for preferred stock of RMPC. The preferred stock in the
approximate amount of $800,000 has a cumulative dividend rate
of 6% per annum.
(6) Rental Income Prior to Acquisition
----------------------------------
The following information relates to income and expenses of
rental property prior to the Company's acquisition of the
properties:
F-42
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(6) Rental Income Prior to Acquisition, Continued
---------------------------------------------
<TABLE>
<CAPTION>
For the six month period
Ended April 30, 1995
------------------------
<S> <C>
Rental Income $ 44,097
Operating Expenses:
Management Fees 3,155
Repairs & Maintenance 7,032
Utilities 282
Miscellaneous 2,472
Property Taxes 5,309
Insurance 1,546
Interest 29,621
-------
Total Operating Expenses 49,417
-------
Net Rental Loss $ (5,320)
=======
</TABLE>
<TABLE>
<CAPTION>
For the six month period
Ended October 31, 1995
------------------------
<S> <C>
Rental Income $ 3,345
Operating Expenses:
Management Fees 334
Repairs & Maintenance 45
Property taxes 854
Insurance 246
-----
Total Operating Expenses 1,479
-----
Net Rental Income $ 1,866
======
</TABLE>
The above income and expenses relate to rental properties
acquired during the period ended October 31, 1995 and include
only income and expenses prior to acquisition related to these
properties as if they were owned by the Company. The statement
of income for the year ended October 31, 1996 includes a full
years operating results on all properties other than one rental
house acquired during year ended October 31, 1996 for
approximately $40,000. This property was not a rental property
prior to acquisition by the Company. The net
F-43
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(6) Rental Income Prior to Acquisition, Continued
---------------------------------------------
projected cash flow for the year ended October 31, 1997 for
this one rental house acquired during 1996 is approximately
$3,000 with projected depreciation of approximately $800,
resulting in a projected net taxable income on this property of
approximately $2,200. The health club/racquetball building
that was acquired through foreclosure proceedings in November,
1996, subsequent to October 31, 1996 had rental income
collected by the previous owner of $42,000, real estate tax
expenses of approximately $8,400 and land lease expenses of
approximately $30,000. Since the property was rented on a
triple net lease basis, the tenant was responsible for all
operating expenses. Projected cash flow on this property for
the year ending October 31, 1997 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Rental Income $ 89,400
Rent reduction as a credit
for tenant improvements (24,000)
-------
Net rental income 65,400
Ground lease payments (30,000)
-------
Net projected cash flow based
on existing lease 35,400
Depreciation expense (14,100)
Capitalized reimbursed tenant
improvements 24,000
-------
Projected taxable income from the
health club/racquetball facility $ 45,300
=======
</TABLE>
(7) Note Payable, Related Party
---------------------------
As of October 31, 1996, a related party had loaned $119,700 to
the Company. This balance is payable on demand and bears
interest at the rate of 8% per annum. This loan is
uncollateralized.
F-44
<PAGE>
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC.
--------------------------------------------------
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995 and October 31, 1996
(8) Fair Value Financial Instruments
--------------------------------
As of October 31, 1996, the Company had various investments in
long term mortgage notes receivable and was obligated under
various mortgage notes payable. Management believes that the
fair value of these financial instruments does not materially
differ from the carrying value of these notes based upon
discounting at current market rates of interest.
(9) Income Taxes
------------
A reconciliation between the expected income tax provision
computed at a federal statutory rate of 34% and the actual
income tax provision follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1996
------------ ------------
<S> <C> <C>
Expected income tax $ 6,114 $ 64,935
Graduated tax brackets (3,417) (7,201)
State tax net of federal benefit 764 5,825
Other - 466
-------- --------
$ 3,461 $ 64,025
======== ========
</TABLE>
The tax effects of temporary differences that give rise to the deferred
tax liability at October 31, 1996 follow:
<TABLE>
<CAPTION>
<S> <C>
Installment sale reporting $ 39,995
less current portion (7,696)
--------
$ 32,299
========
</TABLE>
F-45
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
I Articles of Incorporation, as amended 23
II Article of Amendment of the Certificate 29
of Incorporation (11/01/64)
III Articles of Amendment to the 32
Articles of Incorporation (10/29/96)
IV Bylaws, as amended 35
V Agreement, dated March 20, 1997, 39
between Rocky Mountain Power Co.
and Prime Rate Investment Management
Enterprises, Inc.
VI Consent of Accountant (RMPC) 40
VII Consent of Accountant (PRIME) 41
VIII Bank Loan Agreement 42
22
<PAGE>
EXHIBIT I
ARTICLES OF INCORPORATION
OF
ROCKY MOUNTAIN POWER CO.
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned,
PATRICIA BECK, TREVA BOULWARE, and DOROTHY BLOEDEL, hereby associate
ourselves together for the purpose of becoming a body politic and
corporate under and by virtue of the laws of the State of Colorado,
and do hereby make, sign, execute, and acknowledge this certificate
in writing of our intention so to become a body corporate, and do
hereby certify:
ARTICLE I
The name of this corporation shall be:
ROCKY MOUNTAIN POWER CO.
ARTICLE II
The objects, powers, and purposes of the corporation shall be:
1. To carry on the general business of the generation, transmission,
distribution, and sale of electric current to towns, cities, other power
companies, and the general public for heating, lighting, power, and other
purposes.
2. To take, acquire, appropriate, purchase, sell, store, supply,
furnish, and otherwise deal in water for irrigation, manufacturing,
industrial, mining, domestic, and other purposes.
3. To acquire, build, construct, own, maintain, and operate all
necessary and convenient lands, buildings, structures, dams, machinery,
poles, wires, and other devices and property incident to the foregoing
objects and to obtain such licenses, permits, and franchises from federal
and state authorities and others as may be incident thereto.
23
<PAGE>
4. To borrow money or incur debts for any purpose of the corporation
and secure the same by mortgage, pledge, or otherwise, and issue therefor
promissory notes, debentures, or other obligations, to loan money upon
property, both real and personal, and to take notes and encumbrances
secured by real and personal property.
5. To purchase, hold, sell, assign, transfer, mortgage, pledge, or
otherwise dispose of, or deal in, any bonds, stock, loans or other
securities or evidences of indebtedness created or issued by any other
corporation or corporations, association, or partnership of the State of
Colorado, or of any other state, territory or country, and while owner
thereof, to exercise all the rights, powers and privileges of ownership.
6. To purchase, acquire, hold, own, mortgage, pledge, lease, sell,
assign, transfer, invest, trade and deal in, goods, wares, merchandise
and all other kinds of personal property.
7. To carry out all or any part of the foregoing objects as principal,
factor, agent, contractor or otherwise, either alone or in conjunction
with any person, firm, partnership, association, or any other corporation,
and in carrying on its business and for the purpose of attaining or
furthering any of its objects, to make and perform such contracts of any
kind and description, to do such acts and things, and to exercise any and
all such powers as a natural person could lawfully make, perform, do or
exercise.
8. To conduct business and carry out all or any part of the foregoing
objects and powers in any of the state, territories, colonies, or
dependencies of the United States, in the District of Columbia, and in
any and all foreign countries.
9. To exercise any and all powers conferred by law upon corporations
organized under the laws of Colorado.
The foregoing enumeration of the objects, powers and purposes of
the corporation is not intended as a limitation upon its powers and
objects of our corporation and shall not be construed or held to prohibit
24
<PAGE>
or limit the exercise of any other and further rights and powers which
may now or hereafter be allowed or permitted by law to a corporation.
ARTICLE III
This corporation shall have perpetual existence.
ARTICLE IV
The total number of shares of all classes of stock which this
corporation shall have authority to issue is 600,000 shares including
200,000 shares of common stock without par value and 400,000 shares of
cumulative preferred stock with a par value of $1 per share. The
designation, powers, preferences, and rights, and the qualifications,
limitations, or restrictions thereof, in respect to the classes of stock
of the corporation are as follows:
Section 1. The holders of the cumulative preferred stock shall be
entitled to receive out of surplus of net profits of the corporation,
but only when declared by the Board of Directors, dividends at the rate
of, but not exceeding, six cents ($.06) per share per annum, payable
quarterly on the first days of January, April, July, and October in each
year.
Section 2. Upon dissolution or liquidation of the corporation the
holder of each share of preferred stock shall be entitled to receive and
shall be paid an amount not to exceed $1.00 per share plus an amount
equal to all dividends accrued and unpaid on each share before any sum
shall be paid to or distributed among the holders of the common stock.
After the payment to the holders of the preferred stock of the full
preferential amounts payable to them as aforesaid, any and all assets of
the corporation then remaining shall be available for distribution
pro rata among the holders of the common stock, according to the number
of shares held by each of them respectively.
Section 3. All or any part of the shares of preferred stock shall
be subject to redemption at the option of the Board of Directors of the
corporation on any dividend payment date, upon thirty days' notice by
mail to the holders of shares intended to be redeemed, at their
respective addresses appearing on the stock books of the corporation, at
25
<PAGE>
$1.00 per share. If it is intended at any time to redeem fewer than all
of the shares of preferred stock then outstanding, shares shall be
selected for redemption by lot in such manner as shall from time to time
be determined by the Board of Directors. At any time after the notice of
intention to redeem has been mailed as herein provided, the corporation
may deposit the aggregate redemption price with a bank or trust company
in the City and County of Denver, State of Colorado, named in said
notice, payable in the amounts aforesaid to the respective record holders
of the shares to be redeemed on endorsement and surrender of their
certificates; and upon the making of the deposit, said holders shall
cease to be stockholders with respect to said shares, and from and after
the making of the deposit, said holders shall have no interest in or
claim against the corporation with respect to said shares, but shall be
entitled only to receive said monies from said bank or trust company
without interest. Any monies unclaimed at the end of six years from the
date of said deposit shall be repaid to the corporation. Shares of
preferred stock from time to time redeemed shall be forthwith cancelled
and shall not be reissued.
Section 4. The common stock shall have the sole and exclusive
right to vote on all questions, including the election of directors, and
the holders thereof shall be entitled to one vote for each share of
stock held.
Section 5. As long as any share of preferred stock remains
outstanding, the following conditions shall control:
A. Article IV of the Articles of Incorporation shall not be
amended, changed, or altered in any respect without the consent in
writing of the preferred stockholders representing a majority of the
then issued and outstanding preferred stock.
B. No dividend other than stock dividends shall be declared or
paid on the common stock except when the Board of Directors shall have
declared and paid, or set apart for payment; dividends at the rate
aforesaid on the preferred stock for all prior periods for which such
dividends shall have been cumulative and shall have appropriated and set
apart a sum sufficient for the payment of dividends on the preferred
26
<PAGE>
stock for the then current dividend period.
C. A determination as to whether the requisite criteria are met for
the declaration and payment of dividends on common stock, pursuant to
this Article shall be made by the Board of Directors, which determination
or determinations, in the absence of fraud, shall be conclusive.
Section 6. No holder of common or preferred stock shall have any
preemptive right to subscribe to any issue of stock of this corporation,
to any securities convertible into stock, whether now or hereafter
authorized, except as follows:
After 140,000 shares of common stock have been issued, the holders
of common stock shall have the preemptive right to subscribe for and
purchase their proportionate part of additional shares of common stock,
or securities convertible into common stock, upon their original issue
by the corporation.
ARTICLE V
The corporate powers of this company shall be exercised by a Board
of Directors which shall consist of five members, and PATRICIA BECK,
TREVA BOULWARE, DOROTHY BLOEDEL, HAROLD G. ELLINGSON, and JOHN B.
MITCHELL are hereby designated as directors who shall manage the affairs
of said corporation for the first year of its existence and until their
successors are elected and qualified.
ARTICLE VI
The principal office and place of business of this corporation shall
be at Denver, Colorado, and the original stock ledger and books of
accounts shall be kept in such principal office.
ARTICLE VII
Meetings of the Board of Directors and of stockholders may be held
beyond the limits of the State of Colorado.
27
<PAGE>
ARTICLE VIII
Cumulative voting shall not be allowed in the election of directors.
ARTICLE IX
The Board of Directors shall have power to make such Bylaws as it
may deem proper for the management of the affairs of the company and
for the purpose of carrying on all kinds of business within the objects
and purposes of this corporation.
IN WITNESS WHEREOF the said incorporators have hereunto set their
hands and seals this 22 day of September A.D. 1958.
/S/ Patricia Beck
--------------------
Patricia Beck
/S/ Treva Boulware
---------------------
Treva Boulware
/S/ Dorothy Bloedel
----------------------
Dorothy Bloedel
STATE OF COLORADO
CITY AND COUNTY OF DENVER
The foregoing instrument was acknowledged before me this 22 day of
September , 1958, by PATRICIA BECK, TREVA BOULWARE, and
DOROTHY BLOEDEL.
Witness my hand and official seal.
My commission expires -------------------
/S/ Donald A. Begaz
-----------------------
Notary Public
28
<PAGE>
EXHIBIT II
ARTICLE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ROCKY MOUNTAIN POWER CO.
1. The Articles of Incorporation of Rocky Mountain Power Co.
have been amended as follows:
(a) The preamble to Article IV has been amended to read:
"The total number of shares of all classes of stock which this corporation
shall have authority to issue is 1,400,000 shares including 1,000,000
shares of common stock with a par value of $.10 a share and 400,000
shares of cumulative preferred stock with a par value of $1.00 a share.
The designation, powers, preferences, and rights, and the qualifications,
limitations, or restrictions thereof, in respect to the classes of stock
of the corporation are as follows:"
(b) Article IV, Section 6, has been amended to read:
"Section 6. No holder of common or preferred stock shall have any
pre-emptive right to subscribe to any issue of stock of this corporation,
or any securities convertible into stock, whether now or hereafter
authorized, except as follows:
"The holders of common stock shall have the pre-emptive right to
subscribe for and purchase their proportionate part of additional shares
of common stock, or securities convertible into common stock, upon their
original issue by the corporation, except that such pre-emptive rights
are denied with respect to 70,000 shares of the common stock of the
Company and with respect to such shares of common stock as the Board of
Directors in its discretion may determine from time to time to issue and
sell upon a bona fide public offering, the Board of Directors to have the
authority to determine what constitutes a bona fide public offering."
2. The said amendments were adopted by the shareholders of the
corporation at a special meeting of stockholders duly and lawfully noticed
and convened in Denver, Colorado, at 2:00 o'clock P.M. on October 12,
1964.
29
<PAGE>
3. The number of shares of common no par value stock of the
corporation outstanding on October 12, 1964 and entitled to vote at said
special stockholders meeting was 189,915.
4. At said meeting 165,090 shares of the common no par value stock
were voted in favor of the adoption of the above and foregoing amendments
and each of them. No shares of the common no par value stock were voted
against said amendments.
5. Article IV, Section 5, provides that "as long as any shares of
preferred stock remains outstanding * * * Article IV shall not be amended,
changed or altered in any respect without the consent in writing of the
preferred stockholders representing a majority of the then issued and
outstanding preferred stock." Stockholders holding 183,131 shares of the
6% cumulative preferred par value $1.00 stock of the corporation,
constituting a majority of the 343,193 shares of issued and outstanding
preferred stock, have indicated in writing their consent to the adoption
of the above and foregoing amendments and each of them. None of the
holders of said preferred shares withheld consent or disapproved said
amendment.
6. The manner of exchange, reclassification and cancellation of
the 200,000 shares of common no par value stock of said corporation
theretofore authorized is fully set forth in the following resolution:
"RESOLVED, that the present outstanding 200,000 shares of no par
common stock of Rocky Mountain Power Co. be reconstituted and
reclassified into 200,000 shares of common stock with a par value
of $.10 a share and said stock be considered a part of the 1,000,000
shares of common stock authorized by Article IV of the Articles of
Incorporation, as amended, and that all certificates of no par common
stock of the Company shall be promptly surrendered to the Company
for cancellation and that new certificates representing the
reconstituted and reclassified shares in like numbers shall be issued
to such registered holders."
The above resolution was adopted by an affirmative vote of 165,090
shares of said common no par value stock. No shares were voted
against. The consent in writing to the adoption of the foregoing
resolution has been given by the holders of 183,131 shares of the 6%
cumulative, par value $1.00 stock of the corporation constituting a
majority of the issued and outstanding preferred stock. There was
on October 12, 1964, 343,193 shares of said preferred stock issued and
outstanding.
7. Said amendment effects a change in the amount of stated capital
30
<PAGE>
of Rocky Mountain Power Co. from 200,000 shares of common stock
without par value to 1,000,000 shares of common stock of the par value
of ten cents ($.10) per share. The preferred stock remains unchanged
or unaffected in any respect. The stated capital of this corporation
as changed by said amendments is $500,000.00.
IN WITNESS WHEREOF, this certificate has been executed in duplicate
this 1st day of November, 1964, by the President and Assistant
Secretary of said corporation.
(Registrant) ROCKY MOUNTAIN POWER CO.
(Date) June 2, 1997
By:(Signature) /S/ Charles F. Brannan
-----------------------------
(Name and Title) Charels F. Brannan, President
ATTEST:
/S/ L. J. Nylander
---------------------
Assistant Secretary
31
<PAGE>
EXHIBIT III
Mail to: Secretary of State For office use only
Corporations Section
1560 Broadway, Suite 200
Denver, CO 82020
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT
Please Include a typed TO THE
self-addressed envelope ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Rocky Mountain Power Co.
SECOND: The following amendment to the Articles of Incorporation was adopted
on October 29, 1996, as prescribed by the Colorado Business Corporation
----------------------
Act, in the manner marked with an X below:
No shares have been issued or Directors Elected - Action by Incorporators
No shares have been issued by Directors Elected - Action by Directors
Such amendment was adopted by the board of directors where shares have
been issued
X Such amendment was adopted by a vote of the shareholders. The number of
shares voted for the amendment was sufficient for approval.
See Exhibit "A" attached hereto.
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
Each share of issued and outstanding $0.10 par value common stock is
converted into one share of $0.05 par value common stock.
If these amendments are to have a delayed effective date, please list that
date:
-------------------
(Not to exceed (90) days from the date of filing)
Rocky Mountain Power Co.
-------------------------
By /S/ Michael L. Schumacher
--------------------------
Its President
-------------
Title
32
<PAGE>
ARTICLE IV
The total number of shares of all classes of stock which this corporation
shall have authority to issue is 100,200,000 which shall include 200,000
shares of cumulative preferred stock with a par value of 25.00 per share and
100,000,000 shares of common stock, with a par value of five cents per share.
Designation, preferences, limitations and relative rights of each class shall
be as follows:
Section 1: The holders of the cumulative preferred stock shall be entitled
to receive out of the surplus or the earnings and profits of the corporation,
but only when declared by the Board of Directors, dividends at the rate of
$1.50 per share per annum. Any dividends which are payable, but not paid,
upon the preferred stock shall be cumulated. The holders of the common stock
shall be entitled to receive out of the surplus or the earnings and profits
of the corporation, such dividends as may be declared from time to time by
the Board of Directors, but no dividend shall be declared or paid on the
common stock unless all dividends, current and cumulated, have been paid on,
or otherwise provided for, the preferred stock.
Section 2: All or part of the shares of preferred stock shall be subject to
redemption at the option of the Board of Directors of the Corporation upon
thirty (30) days notice by mail to the holders of shares intended to be
redeemed, at their respective addresses appearing on the stock books of the
corporation, at the par value of such stock, without premium, plus an amount
equal to all dividends accrued and unpaid on such stock. If it is intended
at any time to redeem fewer than all of the shares of preferred stock then
outstanding, shares shall be selected for redemption by lot in such manner as
shall be determined by the Board of Directors. At any time after the notice
of intention to redeem has been mailed as herein provided, the corporation
may deposit the aggregate redemption price with any bank or trust company in
the City and County of Denver, State of Colorado, named in said notice,
payable in the amounts aforesaid to the respective record holders of the
shares to be redeemed on endorsement and surrender of their certificates.
Upon the making of the deposit, said holders shall cease to be stockholders
with respect to said shares and from and after the making of the deposit,
said holders shall have no interest in or claim against the corporation with
respect to said shares, but shall be entitled only to receive said monies
from said bank or trust company without interest. Any monies unclaimed at
the end of six years from the date of said deposit shall be repaid to the
corporation. Shares of preferred stock from time to time redeemed shall be
forthwith cancelled and shall not be reissued.
33
<PAGE>
Section 3. Upon dissolution or liquidation of the corporation the holder of
each share of preferred stock shall be entitled to receive and shall be paid
an amount not to exceed $25.00 per share plus an amount equal to all
dividends accrued and unpaid on each share before any sum shall be paid to or
distributed to the holders of the common stock. After the payment to the
holders of the preferred stock of the full preferential amounts payable to
them as aforesaid, any and all assets of the corporation then remaining
shall be distributed pro-rata among the holders of the common stock, according
to the number of shares held by each of them.
Section 4. The common stock shall have sole and exclusive right to vote on
all questions, including the election of directors, and the holders thereof
shall be entitled to one vote for each share of stock held.
Section 5. No holder of common or of preferred stock shall have any
preemptive right to subscribe to any issue of stock of this corporation, or
any securities convertible into stock, whether now or hereafter authorized.
34
<PAGE>
EXHIBIT IV
ROCKY MOUNTAIN POWER CO.
BYLAWS
(Revised June 6, 1961)
ARTICLE I. MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of the
company shall be held at the office of the corporation in Denver, Colorado,
on the second Tuesday of September, for the election of directors and the
transaction of such other business as may come before said meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
called at any time by resolution of the Board of Directors. It shall be the
duty of the President to call a special meeting whenever so requested in
writing by stockholders owning twenty per cent of the common stock issued and
outstanding. Special meetings shall be held within or without the State of
Colorado at such place as the Board of Directors shall by resolution from
time to time designate.
Section 3. Notice of Stockholders' Meetings. Written or printed notice
stating the place, day and hour of the meeting, and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten or more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to
each stockholder of record entitled to vote at such meeting, except that if
the authorized capital stock is to be increased at least thirty days' notice
shall be given. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
Section 4. Quorum. Stockholders owning a majority of the common stock of
the corporation, present either in person or by proxy, shall constitute a
quorum.
Section 5. Voting. At all meetings of stockholders, the right of any
stockholder to vote shall be determined as prescribed by Section 4 of Article
IV of the Articles of Incorporation and by the laws of the State of Colorado;
provided, however, that only stockholders of record thirty days prior to the
date of any meeting shall be entitled to notice of and to vote at the meeting.
ARTICLE II. DIRECTORS
Section 1. Election. The directors shall be elected at the annual meeting
of stockholders by a plurality of the votes thereat. They shall hold office
35
<PAGE>
for a term of one year and until their successors are elected and qualified.
The number of directors of the corporation shall be seven.
Section 2. Vacancies. Vacancies in the Board of Directors shall be filled
for the unexpired term by a majority vote of the remaining directors at any
regular meeting of the Board or at any special meeting called for that
purpose.
Section 3. Rules and Regulations. The Board of Directors may adopt such
rules and regulations for the conduct of their meetings and the management of
the affairs of the company as they deem proper, not inconsistent however,
with these Bylaws.
Section 4. Meetings. Regular meetings shall be held on such day, at such
hour, and at such place within or without the State of Colorado as the Board
shall by resolution from time to time establish, and no notice thereof shall
be required. Special meetings may be held at any time or any place within or
without the State of Colorado upon call by the President or any three
directors. Notice of any meeting shall be given to each member in person or
by telephone at least twenty-four hours before the meeting, or it may be
mailed or telegraphed to him at his residence or business address at least
seventy-two hours before the meeting. The President shall preside at all
meetings of the Board of Directors unless the Board, at any meeting, shall
elect one of its members to preside at the meeting.
Section 5. Powers. The Board of Directors shall exercise all the powers
of this company and shall have the authority to do all lawful acts and things
not required by statute to be done by the stockholders.
Section 6. Executive Committee. An Executive Committee consisting of
three or more members of the Board of Directors may be appointed from time to
time by resolution passed by a majority of the whole Board. It shall have
all the powers provided by statute except as specially limited by the Board of
Directors. Meetings may be held at any time and at any place within or
without the State of Colorado upon call by any committee member. Notice of
any meeting shall be given to each member in person or by telephone at least
two hours before the meeting, or it may be mailed or telegraphed to him at
his residence or business address at least forty-eight hours before the
meeting. A majority of the members shall constitute a quorum. The Committee
shall record minutes of each meeting in a book kept for that purpose and
shall report the same to the Board of Directors at its next meeting.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this company shall be: a president,
one or more vice presidents, a secretary, and a treasurer. All of said
officers shall serve for a term of one year and until their successors are
elected and qualified.
Section 2. Election. The Board of Directors shall meet immediately after
the annual meeting of stockholders and elect the officers by a majority vote.
The president must be a director. All other offices may be held by anyone,
irrespective of whether he is a member of the Board of Directors. Two or more
of the offices may be held by one person, except that one person may not hold
36
<PAGE>
the office of president and secretary. The officers shall have the duties
set forth hereinafter and such other duties as the Board of Directors may
prescribe.
Section 3. Duties of President. The president shall have general
supervision of the company's affairs, and shall have authority to sign all
certificates, contracts, deeds, and other instruments of the corporation.
Section 4. Duties of Vice President. The Vice Presidents shall in the
absence or incapacity of the president perform the duties of that office.
Section 5. Duties of Secretary. The secretary shall have the custody of
the company's seal and books of record, shall complete the minutes of all
meetings of directors and stockholders, shall attend to the giving and
serving of all notices of the company, and shall keep a stock ledger which
shall be open for inspection, as required by law.
Section 6. Duties of Treasurer. The treasurer shall have the care and
custody of all the funds and securities of the company and shall deposit the
same in the name of the company in such banks or bank as the directors may
designate. He shall give such bond for the faithful performance of his
duties as the Board of Directors may require.
Section 7. Other Officers. The Board of Directors may select such other
officers, employees, and agents with such duties as it may determine.
ARTICLE IV. CAPITAL STOCK
Section 1. Subscriptions. Subscriptions to the capital stock must be paid
to the treasurer at such time or times and in such installments as the Board
of Directors may require.
Section 2. Certificates of Stock. Certificates of stock shall be numbered
and registered in the order they are issued, shall be signed by the president
or vice president and by the secretary, and the seal of the corporation shall
be bound in a book and shall be issued in consecutive order therefrom. There
shall be entered on the certificate stub the name of the person owning the
shares represented thereby, the number of shares, and the date thereof. All
certificates exchanged or returned to the corporation shall be marked
cancelled, with the date of cancellation, by the secretary, and shall
immediately be pasted in the certificate book opposite the memorandum of
their issue.
Section 3. Transfer of Stock. Transfer of stock shall be made only upon
the books of the corporation by the holder in person or by power of attorney
duly executed and filed with the secretary of the corporation, upon the
surrender of the certificate or certificates representing such stock.
ARTICLE V. FISCAL YEAR
The fiscal year of this corporation shall commence on the first day of July
of each year.
37
<PAGE>
ARTICLE VI. SEAL
The seal of the company shall be in the form of a circle and shall bear the
name of the company and the state of its corporation.
ARTICLE VII. AMENDMENT OF BYLAWS
These Bylaws may be amended at any regular or special meeting of the Board
of Directors.
ARTICLE VIII. WAIVER OF NOTICE
Whenever under the provisions of these Bylaws or of any of the corporate
laws of Colorado, the stockholders, directors, or members of the executive
committee are authorized to hold any meeting after notice or after the lapse
of any prescribed period of time, such meeting may be held without notice and
without such lapse of time by a written waiver of such notice signed by every
person entitled to notice. The signature of any director affixed to the
minutes of any meeting of the Board of Directors or the signature of any
member of the executive committee affixed to the minutes of any meeting of
the committee shall constitute waiver of notice of such meeting.
ARTICLE IV. INDEMNITY
The corporation shall indemnify any director or officer or former director
or officer of the corporation, or any person who may have served at its
request as a director or officer of another corporation in which it owns
shares of capital stock or of which it is a creditor, and the personal
representatives of all such persons, against expenses actually and necessarily
incurred by him in connection with the defense of any action, suit or
proceeding in which he is made a party by reason of being or having been such
director or officer, except in relation to matters as to which he shall be
judged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty; but such indemnification shall not be
deemed exclusive of any other rights to which such director or officer may be
entitled, under any bylaw hereafter adopted, or any agreement, vote of
shareholders, or otherwise.
38
<PAGE>
EXHIBIT V
AMENDED EXCHANGE AGREEMENT
This amended agreement is hereby entered into this 20th day of March, 1997
between Rocky Mountain Power Co. (Rocky), Prime Rate Investment Management
Enterprises, Inc. (Prime) and Prime Rate Income & Dividend Enterprises, Inc.
(Pride), a wholly-owned subsidiary of Prime.
Rocky hereby agrees to issue 655,582 shares of its $.05 par value common stock
to 12 shareholders of PRIME in exchange for their approximate 93.65% ownership
of Prime.
Pride, hereby agrees to return its 12,000 (post-split) shares of common stock
and its 32,000 preferred shares of Rocky for cancellation subject to issuance
of the 700,000 post split shares to Prime shareholders.
The effective date of this business combination agreement to be March 31,
1997.
Agreed to this 20th day of March, 1997:
Rocky Mountain Power Co.
/S/ Michael L. Schumacher
--------------------------------
By: Michael L. Schumacher, President
Prime Rate Investment Management Enterprises, Inc.
/S/ George A. Powell
---------------------------------
By: George A. Powell, Vice-President
Prime Rate Income & Dividend Enterprises, Inc.
/S/ George A. Powell
--------------------------------
By: George A. Powell, Vice-President
39
<PAGE>
EXHIBIT VI
CONSENT OF ACCOUNTANT
We hereby consent to the use of our report dated September 6, 1996, on the
financial statements of Rocky Mountain Power Company for the two years ended
June 30, 1996. Such report is being included in a Registration Statement to
be filed by Rocky Mountain Power Company on Form 10-SB.
Miller and McCollom, CPA's
/S/ Miller and McCollom CPA's
---------------------------
Denver, Colorado
June 2, 1997
40
<PAGE>
EXHIBIT VII
CONSENT OF ACCOUNTANT
We hereby consent to the use of our report dated December 6, 1996, on the
financial statements of Prime Rate Investment Management Enterprises, Inc.
and Consolidated Subsidiaries for the two years ended October 31, 1996.
Such report is being included in a Registration Statement to be filed by
Rocky Mountain Power Company on Form 10-SB.
Miller and McCollom, CPA's
/S/ Miller and McCollom CPA's
----------------------------
Denver, Colorado
June 2, 1997
41
<PAGE>
Bank One, Colorado, N.A. Tel 303 759 0111
Westminster Banking Center
7301 North Federal Boulevard
Westminster, CO 80030
BANK ONE
January 28, 1997
Mr. Michael Schumacher, President
Rocky Mountain Power Co.
12835 E. Arapahoe Road, T-II, #110
Englewood, CO 80112
Dear Mr. Schumacher:
We are pleased to inform you that Bank One, Colorado, N.A. (hereinafter
referred to as "Bank") has approved the $400,000 Revolving Line of Credit for
working capital and the Single Pay term loan in the amount of $600,000.
BORROWER: Rocky Mountain Power Co. (RMPC)\
Prime Rate Investment Management Enterprises, Inc. (PRIME) and
Subsidiaries
LOAN AMOUNT: 1) $400,000 Line of Credit
1) $600,000 Single Pay Term Loan
MATURITY DATE: 1) January 31, 1998
2) January 31, 1998
LOAN FEE: 1) 1% - $4,000
2) $1500 will be due quarterly if any amount of the loan
remains outstanding on the first
day of each quarter.
INTEREST RATE: 1) Interest to be computed on the unpaid balance at the rate
of Bank's prime rate plus 1.00% per annum, adjusted on the
day of change.
2) Interest to be computed on the unpaid balance at the Bank
One Certificate of Deposit rate on the date of closing, plus
3%.
GUARANTOR: Michael L. Schumacher
42
<PAGE>
PAYMENT: 1) Interest due monthly with remaining principal and interest
due at maturity.
2) Interest payable quarterly with principal plus interest due
at maturity.
COLLATERAL: 1) Assignment of Notes and Deed of Trust, Bank One CD will be
pledged for first draw to collateralize the full amount of
the note.
2) 90 day Certificate of Deposit. Bank will allow
substitution of other collateral for the balance of the loan,
solely and subject to the approval and acceptance of the
replacement collateral.
3) Life Insurance assigned to Bank One for Michael Schumacher
in the amount of $250,000.
SPECIFIC LENDING CONDITIONS: Bank's obligation to make the loan contemplated
herein and to advance any funds thereunder from time to time shall be
conditioned upon the following:
1) The execution, receipt, and our acceptance of all necessary loan
documentation.
2) The commitment letter is signed and returned to the Bank within 30 days
of the date of this letter.
3) A loan agreement to include the following terms and conditions:
Financial Reporting:
A) Borrowers agree to provide the Bank with CPA Audited Financial Statements
annually within 120 days of each fiscal year end.
B) Borrowers agree to provide the Bank with quarterly financial statements
and accounts receivable agings within 45 days of each quarter end.
C) Borrowers agree to provide bank with mortgage status report for notes
pledged, quarterly within 45 days of each quarter end. Report is to include
balance of note, date last payment was made, notation if pas due and the
number of days past due.
D) Guarantor agrees to provide the Bank with a Personal Financial Statement
annually along with a copy annually of Personal Federal Income Tax Returns
upon their filing with the Internal Revenue Service.
Financial Statement Ratios:
A) Borrower agrees to maintain a debt to tangible net worth ratio not to
exceed 1.00:1.
B) Borrower agrees to maintain debt service coverage ratio greater than
1.25:1.
C) Borrower agrees to maintain a current ratio greater than 1.00:1.
43
<PAGE>
Other:
1) Advances will be limited to 50% of the principal balance of the mortgages
less than 45 days past due and any note greater than 45 days past due will be
eliminated from the borrowing base.
2) The Bank will advance only on foreclosure certificates that represent a
first lien position.
3) The Bank will advance 100% of the purchase amount of a foreclosure
certificate, but the amount of the certificate must be less than or equal to
75% of the properties' value.
4) Only certificates on single family residences will be accepted for
advances. No certificates on condominiums or town homes will be accepted.
5) A separate note will be drawn for each advance. Any note collateralized
by a foreclosure certificate not redeemed in 75 days will be given a five day
grace period for each junior lien on a property to a maximum of 90 days. If
not paid within that time, the note will be extended for 180 days with
interest due monthly and any remaining principal and interest due at the 180
day maturity. The line will be reduced by an equal amount until the note is
paid.
6) Borrower may redeem certificates of deposit pledged as collateral for
purposes of paying down the loans.
7) Full disclosure of the Bank One transactions must be given to all
shareholders of PRIDE, RMPC, and NASDAQ. A letter to Bank One by Borrower
and subsidiaries, acknowledging the requirement has been satisfied is to
follow within 90 days of the closing of the loans.
CANCELLATION OF COMMITMENT: This loan commitment may be cancelled at the
Bank's option under any of the following circumstances:
1. The loan does not close within 30 days of the date of this letter, or
2. The Borrower fails to comply with any of the terms and conditions of this
loan commitment, or
3. There is a material adverse change in the financial condition of the
Borrower or the Borrower files a petition for Bankruptcy or has one filed
against him, or
4. There is a material change in the management or ownership
of the Borrower.
ACKNOWLEDGMENT: Please acknowledge your acceptance of this commitment by
executing the enclosed copy of this letter and returning it to us.
We hope that you will find the above loan proposal adequate for your needs
and that you will look to Bank One, Colorado, N.A. for all your banking
services.
44
<PAGE>
Sincerely,
/S/ Cynthia A. Weller
---------------------
Cynthia A. Weller
Assistant Vice-President
Business Banking Group'
ACCEPTED:
Rocky Mountain Power Co.
/S/ Michael L. Schumacher Date: 1/30/97
--------------------------------- ------------------
by: Michael L. Schumacher, President
Guarantor: /S/ Michael L. Schumacher Date: 1/30/97
-------------------------- ------------------
Michael L. Schumacher
Prime Rate Investment Management Enterprises, Inc.
By: /S/ Michael L. Schumacher Date: 1/30/97
---------------------- ------------------
Michael L. Schumacher
45
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
(Registrant) ROCKY MOUNTAIN POWER COMPANY
(Date) June 2, 1997
BY(Signature) /S/ Michael L. Schumacher
(Name and Title) Michael L. Schumacher
President, CFO and Director
(Date) June 2, 1997
BY(Signature) /S/ George A. Powell
(Name and Title) George A. Powell
Vice President and Director
(Date) June 2, 1997
BY(Signature) /S/ Robert S. Benham
(Name and Title) Robert S. Benham
Director
(Date) June 2, 1997
BY(Signature) /S/ Robert F. Moreland
(Name and Title) Robert F. Moreland
Director
(Date) June 2, 1997
BY(Signature) /S/ Norman L. Horsfield
(Name and Title) Norman L. Horsfield
Director
46
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed balance sheets and unaudited condensed statements of
income found on pages and of the Company's Form 10-QSB for the year
to date, and is qualified in its entierty by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 757,749
<SECURITIES> 0
<RECEIVABLES> 100,970
<ALLOWANCES> 0
<INVENTORY> 852,274
<CURRENT-ASSETS> 1,749,663
<PP&E> 1,615,040
<DEPRECIATION> 28,911
<TOTAL-ASSETS> 4,055,042
<CURRENT-LIABILITIES> 1,203,213
<BONDS> 0
673,808
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,055,042
<SALES> 0
<TOTAL-REVENUES> 129,236
<CGS> 0
<TOTAL-COSTS> 76,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,290
<INCOME-PRETAX> 52,923
<INCOME-TAX> 5,670
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,253
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
