<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
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
incorporation or organization) No.)
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)
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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 authorized 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, 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 agreement to be effective January 31,
1997, PRIME will become a wholly-owned subsidiary of RMPC. Prime Rate Income
& Dividend Enterprises, Inc. (PRIDE, a wholly owned subsidiary of PRIME) owns
approximately 40% of the issued and outstanding common stock and 100% of the
issued and outstanding preferred stock of RMPC prior to the January 1997
business combination reorganization.
The Company's Board of Directors has approved, subject to stockholder
ratification, a 1 for 50 reverse stock split. After January 31, 1997, the
effective date of the business combination/reorganization, the preferred
stock of RMPC will be cancelled and 700,000 shares (post reverse stock split)
of RMPC common stock will be 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 will also be cancelled. Upon
completion of the business combination/reorganization , the former PRIME
shareholders will own approximately 97% of the approximate 718,500 shares
outstanding of RMPC and the transaction will be accounted for as a reverse
acquisition. RMPC and PRIME have the same president and vice president and
the two directors of PRIME are two of the five directors of RMPC. References
to ("the company") refer to RMPC and PRIME on a combined basis. RMPC and
PRIME have not been subject to any bankruptcies, receiverships or similar
proceedings.
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.
BUSINESS OF ISSUER: PRINCIPAL PRODUCTS AND SERVICES
RMPC was previously in the business of investing in water rights in Colorado.
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 600,000 (12,000 shares post split) shares of
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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 total 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 has a 6% per annum cumulative dividend provision.
PRIME, through its wholly-owned subsidiary, PRIDE, is principally in the real
estate investment business. PRIME on a consolidated basis owns residential
rental real estate in Arizona, California, Arkansas and a health/racquetball
club in California. PRIME also is in the business of investing in foreclosure
sale real estate certificates of purchase in the Denver Metropolitan area.
PRIME 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 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 PRIME'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.
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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. The types of costs and
expenses incurred during the redemption period which may be reimbursed are
defined by statutes. 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 employees. 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 agreement with PRIME,
principally in the real estate investment business.
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RESULTS OF OPERATIONS (PRIME CONSOLIDATED)
Six Months Ended October 31, 1995 and Year Ended October 31, 1996
- -----------------------------------------------------------------
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 stock totalled approximately $5,000 during the year ended
October 31, 1996. There were no sales of real estate or stock 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.
LIQUIDITY AND CAPITAL RESOURCES
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.
In addition, the Company has obtained approval of a $1,000,000 loan from a
bank, to be funded by January 31, 1997. The loan will initially be
collateralized by certificates of deposit and cash balances. The bank has
agreed to allow substitution of $800,000 of mortgage notes receivable as
collateral for $400,000 of the loan. 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 agreed to personally
guarantee 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.
Pro forma combined stockholders' equity totalled approximately $2,150,000 at
October 31, 1996.
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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.
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.
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(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
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 $1,039,000 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. $ 726,000
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
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
One rental home located in Fairfield Bay,
Arkansas 40,000
Thirteen residential lots located in Nebraska,
Arkansas, Texas and Florida 83,000
----------
$1,039,000
==========
</TABLE>
All of the above properties are free and clear of encumbrance other than the
nine rental homes located in the Phoenix metropolitan area. Mortgage loans
on these nine properties total approximately $598,000 with average interest
rates 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
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.
This schedule gives effect to the January 31, 1997 business combination/
reorganization:
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class -------
-------------------- Ownership
-----------------------
<S> <C> <C> <C>
Common Stock Michael L. Schumacher (1) 209,508 shares 29.16%
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
Common Stock J. Ben Trujillo (3) 46,666 shares 6.49%
6124 S. Filbert Court
Littleton, CO 80121
Common Stock Terry and Susan R. Seipelt 52,356 shares 7.29%
11330 North Scioto Avenue
Oro Valley, AZ 85737
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Common Stock Duane Gomer 68,374 shares 9.52%
26332 Ganiza
Mission Viejo, CA 92692
Common Stock Ray Foster 68,206 shares 9.49%
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 Hal Morris (2) 68,767 shares 9.57%
3991 MacArthur Blvd. #100
Newport Beach, CA 92660
-------------- ------
Total 650,496 shares 90.54%
</TABLE>
(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. This schedule gives effect to
the January 31, 1997 business combination/reorganization.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent
- -------------- of Beneficial Holder of Beneficial of Class
-------------------- Ownership ---------
-------------
<S> <C> <C> <C>
Common Stock Michael L. Schumacher (1) 209,508 shares 29.16%
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 216,689 shares 30.16%
============== ======
</TABLE>
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(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 will also include 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 329
Jada Schumacher Daughter 329
Spencer Schumacher Son 329
Quinn Schumacher Son 329
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 2,812
=====
</TABLE>
(2) Hal Morris individually will own 5,504 shares of RMPC. In addition, Hal
Morris and his spouse, Connie Morris are the sole beneficiaries of the Hal
Morris Profit Sharing Plan which will own 30,092 shares of RMPC. Applegates
Landing I, a Hal Morris family partnership will own 24,299 shares.
Professional Investors, a Utah Limited Partnership, of which Mr. Morris is a
partner, will own 1,679 shares. Mr. Morris' beneficial ownership will also
include 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>
(3) J. Ben Trujillo will own 25,012 shares individually, 183 shares jointly
with his spouse Percy Trujillo. Mr. Trujillo will also hold 21,471 shares in
trust for former shareholders of Universal Capital Corporation.
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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 anticipates forming an audit committee at
the next meeting of the Board of Directors in January 1997.
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>
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
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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.
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 and George A. Powell
devote approximately 10% and 25%, 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 independent contract persons.
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.
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(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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Item 404 of Regulation S-B)
During the six month period ended October 31, 1995, PRIME issued 301,311
shares of its common stock, (to be 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.
Historical cost included approximately $120,000 of appraised value in real
estate exchanged for services and included in taxable income of the person
that exchanged the real estate for stock of PRIME. Also included in
historical cost is approximately $60,000 of gain, included in taxable income
of the person exchanging the real estate for stock, resulting from
liquidation of the entity previously owning the property. During the year
ended October 31, 1996, PRIME issued 80,682 shares of its common stock (to be
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.
All of the assets described above were formerly owned either by Hal Morris or
Michael L. Schumacher individually or jointly or by entities owned or
controlled by them. Michael L. Schumacher is RMPC's president as well as the
president of PRIME.
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 owns approximately 40% of the outstanding common stock and 100% of
the outstanding preferred stock of RMPC. The business combination to be
effective January 31, 1997 is a transaction between two related parties.
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Effective January 6, 1997, Applegates Landing I, an entity controlled by Hal
Morris, sold 149,370 of PRIME's common shares to four individuals.
Schumacher & Associates, Inc. Money Purchase Pension Plan & Trust, controlled
by 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 will be 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.
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 preferred stock, $25.00 par value. As
of October 31, 1996, a total of 883,464 common shares were issued and
outstanding, held of record by approximately 225 shareholders. During
November 1996, Rky M issued 600,000 shares of common stock to PRIDE, a
wholly-owned subsidiary of PRIME in exchange for nine residential lots valued
at approximately $28,000. RMPC also issued to PRIDE 32,000 shares of $25.00
par value, 6% cumulative preferred stock for approximately $800,000 of
mortgage notes receivable. RMPC directors have approved a 1 for 50 reverse
stock split, subject to stockholder approval. The 883,464 common shares of
RMPC will become approximately 18,500 post-split shares. PRIME and RMPC have
agreed to the cancellation of the 600,000 common and 32,000 preferred shares
of RMPC in exchange for issuance of 700,000 post split shares of RMPC to
PRIME stockholders. Under the terms of this agreement, PRIME will become a
wholly-owned subsidiary of RMPC. There would be approximately 718,500 shares
of RMPC common stock outstanding and no preferred stock outstanding on
January 31, 1997, the proposed effective date of business combination. 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
14
<PAGE>
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.
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.
Upon effectiveness of this Form 10-SB, the Company plans to apply 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 completion of the business combination, RMPC will have approximately
718,500 shares of common stock issued and outstanding. Of such shares,
approximately 18,500 shares, held by approximately 225 shareholders are
eligible for resale. The remaining outstanding shares will be restricted
shares under Rule 144. After the business combination there will be
approximately 383 record holders of the Company's common stock. 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.
15
<PAGE>
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 600,000 shares (post split 12,000
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.
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.
There were no underwriting commissions or discounts with respect to the sales
of unregistered securities identified above.
All of the above sales were made in reliance on Section 4(2) of the Act for
transactions not involving a public offering. With regard to the reliance by
the Company upon such exemption from registration, certain inquiries are made
by the Company to establish that such sales qualified for such exemption from
the registration requirements. In particular, the Company confirmed that (I)
each purchaser provided the Company with written assurance of investment
intent, and the certificates for the shares sold accordingly bear restrictive
legends and (ii) sales were made to a limited number of persons.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(Item 702 of Regulation S-B)
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
16
<PAGE>
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.
17
<PAGE>
PART F/S
ITEM 1. INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description Period Page
- ----------- ------ ----
<S> <C> <C>
Rocky Mountain Power Co. June 30, 1996 F-1
Rocky Mountain Power Co. (Unaudited) October 31, 1996 F-10
Prime Rate Investment Management Enterprises, Inc. October 31, 1996 F-19
Proforma Financial Statements for:
Rocky Mountain Power Co. and
Prime Rate Investment Management Enterprises, Inc. October 31, 1996 F-33
(Unaudited)
</TABLE>
18
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
June 30, 1995 and 1996
F-1
<PAGE>
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements:
Balance Sheets F-4
Statements of Operations F-5
Statements of Changes in Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
F-2
<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.
/s/ Miller and McCollom
Certified Public Accountants
3900 E. Mexico Ave.
Suite 504
Denver, Colorado 80210
September 6, 1996
F-3
<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
at 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-4
<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-5
<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>
The accompanying notes are an integral part of the financial statements.
F-6A
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY111
------------------------------------------------
<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-6B
<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-7
<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-8
<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-9
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
FINANCIAL STATEMENTS
October 31, 1996 and 1995
(Unaudited)
F-10
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ROCKY MOUNTAIN POWER CO.
------------------------
(Unaudited)
Financial Statements:
Balance Sheet F-12
Statements of Operations F-13
Statement of Changes in Stockholders'
Equity F-14
Statements of Cash Flows F-15
Notes to Financial Statements F-16
F-11
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
BALANCE SHEET
October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current Assets:
Cash and cash equivalents $ 12,487
-----------
Total Current Assets 12,487
-----------
TOTAL ASSETS $ 12,487
===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
Current Liabilities:
Accounts payable $ 638
-----------
Total Current Liabilities 638
-----------
TOTAL LIABILITIES 638
-----------
Stockholders' Equity:
Common stock, $0.10 par value,
1,000,000 shares authorized,
883,463.6 shares issued and
outstanding 88,346
Additional paid-in capital 799,166
Accumulated (deficit) (875,663)
-----------
TOTAL STOCKHOLDERS' EQUITY 11,849
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,487
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENTS OF OPERATIONS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Four Months Four Months
Ended Ended
October 31, October 31,
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Investment income $ 312 376
----------- ---------
312 376
----------- ---------
Operating Expenses:
Directors' fees and meeting expense 6,365 6,511
Legal and accounting 2,358 3,313
Office supplies and expense 67 31
Contract services 650 -
----------- ----------
9,440 9,855
------------ -----------
Net (Loss) $ (9,128) $ (9,479)
============ ===========
Net (Loss) Per Share $ (.01) $ (.01)
============ ===========
Shares Outstanding $ 883,464 $ 883,464
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------ Additional
Number of Paid-in
Shares Amount Capital
--------- ------ ----------
<S> <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)
Net (loss) for
the four months
ended October 31
1996 (unaudited) - - -
---------- -------- -----------
Balance,
October 31, 1996 883,464 $88,346 $ 799,166
========== ======== ===========
</TABLE>
<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 -
Net (loss) for
the four months
ended October 31
1996 (unaudited) (9,128) - - (9,128)
---------- --------- --------- --------
Balance,
October 31, 1996 $(875,663) - $ - $11,849
========== ========== ========= ========
</TABLE>
F-14
<PAGE>
ROCKY MOUNTAIN POWER, CO.
-------------------------
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Four Months Four Months
Ended Ended
October 31, October 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (9,128) $ (9,479)
---------- ----------
Adjustments to reconcile net (loss)
to net cash (used) by operating
activities:
Increase in accounts payable 638 -
---------- ---------
Total Adjustments 638 -
---------- ---------
Net Cash (Used)by operating activities (8,490) (9,479)
---------- ---------
Net (Decrease) in Cash and Cash Equivalents (8,490) (9,479)
Cash and Cash Equivalents at Beginning of Period 20,977 29,766
---------- ---------
Cash and Cash Equivalents at End of Period $ 12,487 $ 20,287
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
(Unaudited)
(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. As of October 31, 1996 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.
Going Concern
-------------
At October 31, 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 October 31, 1996,
may not be sufficient to meet normal annual operating expenses.
F-16
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
(Unaudited)
(1) Summary of Significant Accounting Policies, Continued
- ----------------------------------------------------------
Going Concern, Continued
------------------------
These factors indicate that the Company may be unable to
continue as a going concern.
The Company has entered into a business combination agreement
to be effective January 31, 1997. The Company has also issued
additional common and preferred stock subsequent to October 31
1996.
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. The Company also authorized
200,000 shares of $25.00 par value, 6% cumulative preferred
stock.
The Company has issued 600,000 common shares and 32,000
preferred shares. The common shares were issued in exchange
for nine residential lots and the preferred shares were issued
in exchange for approximately $800,000 of mortgage notes
receivable with average interest rates of approximately 8%.
According to the terms of the business combination to be
effective January 31, 1997, these new common and preferred
shares would be canceled, the Company would effect a 1 for 50
reverse stock split and issue 700,000 new common shares for
the acquisition of Prime Rate Investment Management
Enterprises, Inc. a Colorado corporation principally in the
real estate business.
(2) Income Taxes
- ----------------
The Company utilizes the same methods of accounting for income
tax purposes as is utilized for financial reporting purposes.
At October 31, 1996, the Company has a net operating loss of
approximately $565,000 expiring in 2008 through 2012. No
deferred tax asset is reflected due to questionable future
realization.
F-17
<PAGE>
ROCKY MOUNTAIN POWER CO.
------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
(Unaudited)
(3) Unaudited Financial Statements
- ----------------------------------
The balance sheet as of October 31, 1996, the statements of
operations and the statements of cash flows for the four month
periods ended October 31, 1996 and 1995, and the statement of
changes in stockholders' equity for the four month period
ended October 31, 1996 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 financial position, results of operations,
cash flows and changes in stockholders' equity at October 31,
1996 and for all periods presented have been made.
(4) Retirement of Treasury Stock
- ---------------------------------
During the four month period ended October 31, 1996 the
treasury stock was retired and returned to authorized but
unissued shares.
F-18
<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-20
Consolidated Financial Statements:
Consolidated Balance Sheets F-21
Consolidated Statements of Income F-22
Consolidated Statement of Changes in F-23
Stockholders' Equity
Consolidated Statements of Cash Flows F-24
Notes to Consolidated Financial Statements F-25
F-19
<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.
/s/ Miller and McCollom
Certified Public Accountants
3900 E. Mexico Ave.
Suite 504
Denver, Colorado 80210
December 6, 1996
F-20
<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
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
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-21
<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> <C> <C>
Revenue:
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-22
<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-23
<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-24
<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-25
<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-26
<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>
Year ended March 31,
<S> <C>
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-27
<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.
Average interest rates on mortgagee notes receivable
approximate 8% per annum with monthly repayment terms being
amortized over periods up to fifteen years.
TheCompany 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 amount to approximately
F-28
<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
--------------------------------------------
$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.
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.
(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-29
<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
---------------------------------------------------
For the six month period
Ended April 30, 1995
--------------------
<TABLE>
<CAPTION>
<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>
For the six month period
Ended October 31, 1995
----------------------
<TABLE>
<CAPTION>
<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-30
<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-31
<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-32
<PAGE>
Index to Pro Forma Financial Statements
ROCKY MOUNTAIN POWER CO. (RMPC)
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC. (PRIME)
Pro Forma Combined Financial Statements (Unaudited)
Pro Forma Financial Statements:
Balance Sheet F-34
Statement of Operations F-35
Notes to Pro Forma Financial Statements F-36
F-33
<PAGE>
ROCKY MOUNTAIN POWER CO. (RMPC)
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC. (PRIME)
PRO FORMA BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
RMPC PRIME Pro Forma Pro Forma
October 31, October 31, Adjustments Combined
1996 1996
Current Assets: ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Cash $ 12,487 $ 33,920 $(B)1,000,000 $ 1,046,407
Certificates of
Purchase - 372,074 372,074
Mortgage notes
receivable,
current portion - 219,318 219,318
Other - 27,333 27,333
---------- -------- ----------- ---------
Total Current Assets 12,487 652,645 1,000,000 1,665,132
Real estate - 1,039,057 (C)547,634 1,586,691
Mortgage notes
receivable - 733,842 733,842
Mortgage note
receivable in
process of
foreclosure - 547,634 (C)(547,634) -
Deferred income
taxes - - (A)43,013 43,013
---------- ---------- ---------- ----------
Total Assets $ 12,487 $2,973,178 $ 1,043,013 $ 4,028,678
========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 638 $ 30,641 $ $ 31,279
Notes payable, current - 17,347 (B)1,000,000 1,017,347
Note payable, related
party - 119,700 119,700
Income taxes payable - 23,389 23,389
Deferred income taxes
payable - 7,696 7,696
Other - 16,197 16,197
Total Current --------- ------- ---------- ---------
Liabilities 638 214,970 1,000,000 1,215,608
Deferred income
taxes payable - 32,299 32,299
Notes payable - 629,131 629.131
--------- -------- --------- ---------
Total Liabilities 638 876,400 1,000,000 1,877,038
--------- -------- --------- ---------
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,
718,500 shares
issued and
outstanding
after the business
combination 88,346 383,171 (A) (435,592) 35,925
Additional paid-in
capital 799,166 1,572,127 (A) (397,058) 1,974,235
Accumulated (deficit) (875,663) 141,480 (A) 875,663 141,480
------- --------- ------------ ---------
Total Stockholders'
Equity 11,849 2,096,778 43,013 2,151,640
------- --------- ------------ ---------
Total Liabilities
and Stockholders'
Equity $ 12,487 $2,973,178 $ 1,043,013 $4,028,678
========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
ROCKY MOUNTAIN POWER CO. (RMPC)
PRIME RATE INVESTMENT MANAGEMENT ENTERPRISES, INC. (PRIME)
PRO FORMA STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(RMPC) (PRIME)
Year Ended Year Ended
June 30, October 31, Pro Forma Pro Forma
1996 1996 Adjustments Combined
--------- ---------- ----------- ---------
REVENUE:
<S> <C> <C> <C> <C>
Rent income - 150,707 150,707
Interest income 1,129 85,441 86,570
Gain on sale of assets - 105,714 105,714
------- -------- --------- --------
Gross Profit 1,129 341,862 342,991
------- -------- --------- --------
OPERATING EXPENSES:
Property management
fees - 12,813 12,813
Depreciation - 23,431 23,431
Interest - 66,490 66,490
Real estate taxes
and insurance - 17,436 17,436
Association dues - 11,259 11,259
Repairs and maint-
enance - 9,046 9,046
Utilities and other 9,918 10,403 20,321
Total Operating ------ ------- -------
Expenses 9,918 150,878 160,796
------ ------- -------- -------
Net Income (Loss)
before provision
for income taxes (8,789) 190,984 182,195
(Provision for)
income taxes - (64,025) (A) 2,946 (61,079)
------- ------- --------- -------
Net Income (Loss) $ (8,789) $126,959 $ 2,946 $121,116
======= ======= ========= =======
Net Income per
Common Share $ .17
=======
Total Number of
Common Shares
Outstanding (1) 718,500
=======
</TABLE>
Note 1 - Assumes issuance of 700,000 shares for acquisition of
PRIME plus 18,500 shares of RMPC outstanding as of October 31, 1996
after giving effect to the 1 for 50 reverse stock.
The accompanying notes are an integral part of the financial
statements.
F-35
<PAGE>
ROCKY MOUNTAIN POWER CO. (RMPC)
PRIME RATE INVESTMENT ENTERPRISES, INC. (PRIME)
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(1) General
- ------------
During January, 1997 RMPC entered into a business combination
agreement with PRIME whereby, according to the terms of the
agreement, PRIME will become a wholly-owned subsidiary of RMPC
effective January 31, 1997, contingent upon stockholder
approval of the reverse stock split.
(2) Pro Forma Information
- --------------------------
The pro forma gives effect to the business combination of RMPC
and PRIME and also gives effect to the loan agreement with a
bank to be funded by January 31, 1997. According to the terms
of the loan agreement, the bank has agreed to loan $1,000,000
to the Company. The purpose of this loan is to provide
additional financial resources to the Company for purpose of
investing in real estate foreclosure certificates of purchase.
Initially the loan will be collateralized by certificates of
deposit and cash balances deposited in the bank. The bank has
agreed to allow substitution of $800,000 of mortgage notes
receivable as collateral for $400,000 of the bank loan. The
bank has agreed in principal to 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 agreed to personally
guarantee the total loan balance as required by the terms of
the bank loan agreement. The proforma balance sheet presents
the effect of the business combination as if it happened
October 31, 1996. The proforma income statement presents the
results of operations as if the business combination had
happened at the beginning of the period presented.
(3) Pro Forma Adjustments
- --------------------------
(A) This entry gives effect to the business combination of
RMPC and PRIME, including the recordings of the deferred
tax asset related to the RMPC net operating loss
carryover. The transaction is being accounted for as a
reverse acquisition. This entry also gives effect to the
1 for 50 share reverse stock split approved by the RMPC
Board of Directors and subject to approval of the RMPC
shareholders.
(B) This entry gives effect to the loan agreement funding by
January 31, 1997.
F-36
<PAGE>
ROCKY MOUNTAIN POWER CO. (RMPC)
PRIME RATE INVESTMENT ENTERPRISES, INC. (PRIME)
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(3) Proforma Adjustments, Continued
- ------------------------------------
(C) This entry gives effect to completion of the foreclosure
process on the mortgage note receivable whereby the
Company obtained title to the property during November,
1996.
(4) Issuance of Common and Preferred Stock of RMPC
- ---------------------------------------------------
During November 1996, RMPC issued 600,000 of its common shares
(post reverse split 12,000 shares) to Prime Rate Income &
Dividend Enterprises, Inc. (PRIDE), a wholly-owned subsidiary
of PRIME. PRIDE exchanged nine residential lots located in
Texas, Arkansas and Florida for the 12,000 post split shares
representing approximately 40% ownership of RMPC. RMPC also
issued 32,000 shares of RMPC $25.00 par value preferred stock
to PRIDE in exchange for approximately $800,000 of mortgage
notes receivable. According to the terms of the RMPC/PRIME
business combination agreement, the common and preferred
shares of RMPC owned by PRIDE will be cancelled and 700,000
shares of RMPC common stock will be issued to PRIME
shareholders in exchange for 100% ownership of PRIME.
F-37
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 Co.
BY (Signature) /S/ Michael L. Schumacher
(Date) January 20, 1997
(Name and Title) Michael L. Schumacher
President Chief Financial Officer
and Director
BY(Signature) /S/ George A. Powell
(Date) January 20, 1997
(Name and Title) George A. Powell
Director
BY(Signature) /s/ Robert S. Benham
(Date) January 20, 1997
(Name and Title) Robert F. Benham
Director
BY (Signature) /s/
(Name and Title) Robert F. Moreland
BY(Signature) /s/
(Name and Title) Norman L. Horsfield
39
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
I Articles of Incorporation, as amended 20
II Article of Amendment of the Certificate 26
of Incorporation (11/01/64)
III Articles of Amendment to the 29
Articles of Incorporation (10/29/96)
IV Bylaws, as amended 32
V Agreement, dated January 6, 1997, 36
between Rocky Mountain Power Co.
and Prime Rate Investment Management
Enterprises, Inc.
VI Consent of Accountant (RMPC) 37
VII Consent of Accountant (PRIME) 38
27 Financial Data Schedule 39
19
<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.
20
<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 or limit the exercise
21
<PAGE>
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
22
<PAGE>
books of the corporation, at $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
23
<PAGE>
the payment of dividends on the preferred 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.
ARTICLE VIII
24
<PAGE>
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.
BY (Signature) /S/ Patricia Beck
-----------------
Patricia Beck
BY(Signature) /S/ Treva Boulware
------------------
Treva Boulware
BY(Signature) /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
25
<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.
26
<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 $1.00 stock of the corporation constituting a majority of the
issued and outstanding preferred stock. There was on October 12, 1964,
343,193 shares of said preferred stock issued and outstanding.
27
<PAGE>
7. Said amendment effects a change in the amount of stated capital of
Rocky Mountain Power Co. from 200,000 shares of common stock without par
value to 1,000,000 shares of common stock of the par value of ten cents
($.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.
BY (Signature) /S/ Charles F. Brannan
(Date)
(Name and Title) Charles F. Brannan, President
ATTEST:
BY (Signature) /S/ L. J. Nylander
(Date)
(Name and Title) L. J. Nylander, Assistant Secretary
28
<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)
(Registrant) Rocky Mountain Power Co.
------------------------------
BY(Signature) /S/ Michael L. Schumacher
(Name and Title) Michael L. Schumacher Its President
29
<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.
30
<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.
31
<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 for a term of one year and until their successors are elected and
32
<PAGE>
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
33
<PAGE>
may not hold 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.
34
<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.
35
<PAGE>
EXHIBIT V
EXCHANGE AGREEMENT
This agreement is hereby entered into this 1st day of January, 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 700,000 shares of its $.05 par value common
stock in exchange for one hundred percent (100%) ownership of Prime subject
to stockholder approval of a one-for-fifty reverse stock split of Rocky's
common stock.
Pride, hereby agrees to return its 600,000 (pre-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 January 31,
1997.
Agreed to this 1st day of January, 1997:
(Registrant) Rocky Mountain Power Co.
BY(Signature) /S/ Michael L. Schumacher
(Date) January 1, 1997
(Name and Title) By: Michael L. Schumacher, President
Prime Rate Investment Management Enterprises, Inc.
BY(Signature) /S/ George A. Powell
(Date) January 1, 1997
(Name and Title) By: George A. Powell, Vice-President
Prime Rate Income & Dividend Enterprises, Inc.
BY(Signature) /S/ George A. Powell
(Date) January 1, 1997
(Name and Title) By: George A. Powell, Vice-President
36
<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
BY (Signature) /S/ Miller and McCollom CPA's
Denver, Colorado
(Date) January 15, 1997
37
<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
BY(Signature) /S/ Miller and McCollom CPA's
Denver, Colorado
(Date) January 15, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1996
<CASH> 20,977
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,977
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,977
<CURRENT-LIABILITIES> 0
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0
0
<COMMON> 1,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,977
<SALES> 0
<TOTAL-REVENUES> 1,129
<CGS> 0
<TOTAL-COSTS> 9,918
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,789)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,789)
<EPS-PRIMARY> (0)
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</TABLE>
