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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required) For the fiscal year ended
X June 30, 1999
- -------- or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
- --------
For the Transition Period from ____________ to _____________
Commission File Number 0-22027
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ROCKY MOUNTAIN POWER CO.
---------------------------------------------------------
(Name of Small business Issuer as Specified in its charter)
N/A
---------------------------
(Previous name of Registrant)
Colorado 84-0503585
----------------------------- ---------------------
(State or other jurisdiction of
incorporation or organization) (IRS Employer ID Number)
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 pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Name of each exchange on which registered
-----------------------------------------
N/A
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(b) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject of such filing requirements for the past
90 days.
YES X NO
--------- ---------
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. ( X )
The Issuer's revenues for its most recent year ended June 30, 1999 were
$209,084.
The Issuer is unable to calculate the aggregate market value of the common
stock of the Registrant held by nonaffiliates because there is a limited
market for the common stock.
As of June 30, 1999, 608,917 shares of common stock were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format
(Check One):
Yes No X
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PART I
Item 1. Description of Business
General
Rocky Mountain Power Co. (RMPC) is a corporation which was formed under the
laws of the State of Colorado on September 30, 1958. The Articles of
Incorporation of the Company authorize it to issue 100,000,000 shares of
common stock with $.05 per share par value and 200,000 shares of preferred
stock with a par value of $25.00 per share.
RMPC has approximately 439 shareholders.
The RMPC common stock is traded on the NASDAQ Bulletin Board under the symbol
RMPC.
The principal executive offices of the Company are located at 12835 E.
Arapahoe Road, T-II, #110, Englewood, Colorado 80112, and the Company's
telephone number is (303) 792-2466.
The Company has selected June 30 as its fiscal year end.
Recent Developments
None
Description of Business
RMPC's wholly owned subsidiary Prime Rate Income & Dividend Enterprises, Inc.
(PRIDE), is principally in the real estate investment business. PRIDE also is
in the business of investing in foreclosure sale real estate certificates of
purchase in the Denver Metropolitan area. PRIDE acquires the certificates of
purchase by bidding at foreclosure sales. Under Colorado statutes, there is
generally a minimum redemption period of seventy-five (75) days whereby the
property owner can redeem the foreclosed property by paying the certificate of
purchase balance bid price plus interest at the rate specified on the mortgage
note, plus reimbursement of certain costs and expenses incurred by the holder
of the certificate of purchase during the redemption period. If the former
property owner fails to redeem the property, then junior lienholders have a
right to redeem. If the property is not redeemed, the holder of the
certificate of purchase will be granted title to the property. It is PRIDE's
investment policy to invest in certificates of purchase that have sufficient
equity such that it is likely that the property will be redeemed.
As of June 30, 1999 the Company had $906,464 invested in mortgage notes
2
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receivable. The Company's investments in mortgage loans are collateralized
principally by deeds of trust on real estate located primarily in Colorado,
California and Arizona. As of June 30, 1999, the Company had seven mortgage
loans receivable from one individual totaling approximately $87,243. The
loans as a percentage of value of the real estate collateral were
approximately 90% at the time of sale. The Company also had, as of June 30,
1999 17 mortgage loans reciveable from another non-affiliated individual
totaling approximately $565,497. The second individual's loans as a
percentage of value of the real estate collateral were approximately 100% at
the time of sale but, as additional collateral for the loans receivable from
this individual, the Company has a junior lien on another property owned by
this individual. These mortgage loans to the two individuals are a material
concentration of credit risk.
The Market Opportunity
The market opportunity for investments in foreclosure real estate certificates
of purchase varies depending upon such factors as interest rates, general
economic conditions and real estate construction costs. The Company 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.
Employees
The Company has no full time employees. Mr. Michael L. Schumacher, the
Company's President, Mr. George A. Powell, the Company's Vice President and
Mr. James D. Phelps, the Company's Secretary devote approximately 25%, 50%
and 1% respectively, of their time to the Company's business. The real
estate properties are managed by various independent property management
companies.
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Item 2. Description of Property
(a) PRIDE and RMPC currently use minimal office space and facilities provided
at no cost by the Company's President.
(b) PRIDE 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 exsisting loans on properties or owner
carry back loans on properties. The Company has no limitation policy on the
number or amount of mortgages which may be placed on any one piece of
property. Appropriateness of real estate investments and related financing
decisions are determined by the officers of the Company.
(2) The Company's investments in mortgage loans are principally loans carried
back on properties sold. Management has no current plans to actively invest
in mortgage loans other than those related to properties sold by the Company.
The Company has and may continue to provide carry back loans on properties
equal to 100% of the sales price of properties if adequate additional
collateral is provided.
(3) The Company currently has no investments and no plans to invest in
securities of or interests in persons primarily engaged in real estate
activities.
(c) As of June 30, 1999, the Company had no investments in real estate which
amounted to ten percent or more of the total assets of the Company.
The Company has approximately $241,000 invested in other real estate.
Generally summarized as follows:
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Description
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.
Thirteen residential lots located in Nebraska, Arkansas,
Florida and North Dakota $ 160,000
81,000
------------
$ 241,000
============
All of the above properties are free and clear of encumbrances. The rental
house has an annual lease. 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 property for its 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 property has had vacancies of less than 5% during the
last two years.
Item 3. Legal Proceedings
RMPC is not party to any material legal proceeding, nor is the Company's
property the subject of any material legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
None during the year ended June 30, 1999.
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters
(a) Market Information. As of June 30, 1999 the RMPC common stock was listed
on the NASDAQ Bulletin Board under the symbol "RMPC." The first available
quotes on the bulletin board appeared in the 4th quarter of 1997. The bid
prices included below have been obtained from sources believed to be
reliable:
Low High
Quarters Ended Bid Bid
December 31, 1997 3.25 3.50
March 31, 1998 3.00 3.25
June 30, 1998 3.00 3.50
September 30, 1998 3.00 3.25
December 31, 1998 3.00 3.25
March 31, 1999 3.00 3.25
June 30, 1999 3.00 3.25
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The Company has applied for quotation of the Common Stock on the NASDAQ Small
Cap Exchange operated by the National Association of Securities Dealers, Inc.
and has initially been denied listing status. The Company is currently
appealing the decision.
(b) Holders. RMPC has approximately 608,917 shares of common stock issued and
outstanding as of June 30, 1999, which are held by approximately 439
shareholders. Of such shares, approximately 240,000 shares, held by
approximately 420 shareholders are eligible for resale. The remaining shares
are restricted shares under Rule 144. The Company presently has no existing
stock option or other plans nor are there any outstanding options, warrants
or securities convertible into Common Stock.
(c) Dividend Policy. 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 at the discretion of the Board
of Directors.
Item 6. Management's Discussion and Analysis or Plan of Operations
Plan of Operations
GENERAL
RESULTS OF OPERATIONS
Year Ended June 30, 1998
Revenue for the year ended June 30, 1998 was approximately $320,000 as
compared to revenue of approximately $341,000 for the eight months ended June
30, 1997. The average per month for the year ended June 30, 1998 was
approximately $27,000 as compared to approximately $43,000 per eight month
period ended June 30, 1997. This decrease resulted principally from less
rental income during the period ended June 30, 1998 since various properties
were sold near the end of the period ended June 30, 1997. The Company's
interest income increased principally due to the carryback mortgages on
properties sold. During the year ended June 30, 1998 and the eight month
period ended June 30, 1997 the Company had gains from the sale of real estate
of approximately $97,000 and $114,000 respectively. Past gains may not
necessarily be indicative of future results.
Operating expenses were approximately $182,000 during the year ended June 30,
1998, and approximately $167,000 during the eight month period ended June 30,
6
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1997. The average per month for the Period ended June 30, 1998 was
approximately $15,000 as compared to approximately $21,000 per month for the
eight month period ended June 30, 1997. The decreases relate principally to
the decrease in operating and interest expenses on properties previously
owned.
Net income after the provision for income taxes decreased from approximately
$133,000 during the eight month period ended June 30, 1997 to approximately
$100,000 during the year ended June 30, 1998, a decrease of approximately
$2,700 per month.
Year Ended June 30, 1999
Revenue for the year ended June 30, 1999 was approximately $210,000 as
compared to revenue of approximately $320,000 for the year ended June 30,
1998. The average per month for the year ended June 30, 199 was approximately
$17,500 as compared to approximately $27,000 per month for the year ended June
30, 1998. This decrease resulted in part from less rental income and less
management fee income during the period ended June 30, 1999 since various
properties were sold near the end of the period ended June 30, 1998. The
Company's interest income decreased principaly due to the payoff of several
mortgages on properties sold. During the year ended June 30, 1999 and the
year ended June 30, 1998 the Company had gains from the sale of real estate
of approximately $44,000 and $97,000 respectively. Past gains may not
necessarily be indicative of future results.
Operating expenses were approximately $59,000 during the year ended June 30,
1999, and approximately $182,000 during the year ended June 30, 1998. The
average per month for the period ended June 30, 1999 was approximately $5,000
as compared to approximately $15,000 per month for the year ended June 30,
1998. The decreases relate principally to the decrease in operating and
interest expenses on properties previously owned.
Net income after the provision for income taxes increased from approximately
$100,000 during the year ended June 30, 1998 to approximately $110,000 during
the year ended June 30, 1999, an increase of approximately $800 per month.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Company had an unrestricted cash balance of approximately
$70,000. The Company's current assets were approximately $1,342,000 at June
30, 1998 and its current liabilities totaled approximately $389,000, resulting
in net working capital of approximately $953,000, a current ratio of
approximately 3.45 to one.
At June 30, 1999 the Company had an unrestricted cash balance of approximately
7
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$445,000. The Company's current assets were approximately $1,171,000 at June
30, 1998 and its current liabilities totaled approximately $87,000, resulting
in net working capital of approximately $1,084,000, a current ratio of
approximately 13.46 to one.
FINANCIAL POSITION
Stockholders' equity totaled approximately $2,130,000 at June 30, 1999 as
compared to approximately $2,017,000 at June 30, 1998, an increase of
approximately $113,000. This increase resulted from a net income of
approximately $110,000 and additional stock issued in the approximate amount
of $3,500.
Management has not made any commitments which will require any material
financial resources in excess of resources now available to the Company.
Subsequent Events
None
Forward-Looking Statements
Certain statements concerning the Company's plans and intentions included
herein constitute forward-looking statements for purposes of the Securities
Litigation Reform Act of 1995 for which the Company claims a safe harbor under
that Act.
There are a number of factors that may affect the future results of the
Company, including, but not limited to, (a) interest rates, (b) general
economic conditions and (c) specific economic conditions within the areas
where the Company operates.
This annual report contains both historical facts and forward-looking
statements. Any forward-looking statements involve risks and uncertainties,
including, but not limited to, those mentioned above. Moreover, future
revenue and margin trends cannot be reliably predicted.
Item 7. Financial Statements
Please see pages F-1 through F-11.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or practices or financial
statement disclosure. There have been no changes in the Company's independent
accountants.
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PART III
Item 9. Directors, Executive Officers,
and Control Persons
The directors and officers of RMPC
are as follows:
NAME AGE POSITION(S) TENURE
Michael L. Schumacher 50 President and Director October 31, 1996 to
present
George A. Powell 72 Vice President and Director October 31, 1996 to
present
James D. Phelps 59 Secretary and Treasurer 1992 to present
Robert S. Benham 56 Director October 1996 to present
Robert F. Moreland58 Director 1989 to present
Norman L. Horsfield74 Director 1989 to present
Peter Porath 68 Director 1997 to present
Michael L. Schumacher has been a director and president of RMPC since October
31, 1996. He also has been a director and president of PRIME and its
subsidiaries since inception, May 1, 1995. Mr. Schumacher was previously,
until 1995, a director and president of Universal Capital Corporation and
High Hopes, Inc., both public reporting companies. Universal Capital
Corporation was an inactive public shell and High Hopes, Inc. was a real
estate investment company while Mr. Schumacher was serving as president and
director. Mr. Schumacher is the director and President of Schumacher &
Associates, Inc., a certified public accounting firm located in Englewood,
Colorado that provides audit services, principally to public companies on a
national basis throughout the U.S.A. Mr. Schumacher is a Certified Public
Accountant, Certified Management Accountant and an Accredited Financial
Planning Specialist. Mr. Schumacher has a bachelors degree in Business
Administration with a major in accounting from the University of Nebraska at
Kearney and a Masters in Business Administration from the University of
Colorado.
George A. Powell has been a director and vice president of RMPC since October,
1996. He also has been a director and vice president of PRIME and its
subsidiaries since October, 1996. Mr. Powell was previously a director and
president of Continental Investors Life, Inc., a public reporting insurance
company. Since Mr. Powell's retirement from the insurance business in 1988,
he has been self-employed as a business consultant.
James D. Phelps has been secretary of RMPC since 1992 and a director since
1997. 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
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self employed as a consultant/accountant for various clients in the Denver
metropolitan area.
Robert S. Benham has been a director of RMPC since 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 since 1989. 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 since 1982. Mr. Horsfield
has a degree from England in Electrical Engineering and has retired as an
electrical engineer with English Electric Corporation.
Peter Porath has been a director of RMPC since 1997. Mr. Porath has a
Bachelor's Degree from 1998. RIPON College and an L.L.B. degree from DePaul
University. Mr. Porath is currently President of Dunhill Sports, a private
company in the sports products industry. Mr. Porath was previously President
of Vacation Ownership Marketing, a real estate development company.
Mr. Porath also was previously Vice-president of Investment Corporation of
Florida, a real estate development company that developed the City of
Wellington, Florida and Palm Beach Polo Club.
Item 10. Executive Compensation
There was no compensation paid to any officer of RMPC or PRIME other than
director fees paid to RMPC directors.
Board of Director Meetings and Committees
The Board of Directors held no meetings during the year ended June 30, 1999,
but entered into various consent resolutions in lieu of meetings.
The Company's Board of Directors has established an Audit Committee. The
function of the Audit Committee is to review the results and scope of the
audit and other services provided by the Company's independent auditors,
review and evaluate the Company's internal audit and control functions
and monitor transactions between the Company and its employees, officers and
directors.
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Summary Compensation Table
The following table sets forth the aggregate cash compensation paid by the
Company for services rendered during the last three years to the Company by
its Chief Executive Officer and to each of the Company's other executive
officers whose annual salary, bonus and other compensation exceeded $100,000
in 1999.
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
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Other
Annual Restricted
Compen- Stock Options/
LTIP
sation Award(s) SARs
Payouts
Name & Principal ($) (%) (#) ($)
Position Year Salary($) Bonus($)
Michael L.
Schumacher 1999 $ - $ - $ - $ - - $ -
(1) Mr. Schumacher received $500 of common stock
(2) as directors fees during the period ended June 30, 1999.
Compensation of Directors
There was no compensation paid to any director of RMPC or PRIME other than
$3,500 paid as director fees to RMPC directors for the year ended June 30,
1999, and $3,500 paid as directors fees to RMPC directors for the year ended
June 30, 1998.
Employment Agreements
None
Long-Term Incentive Plan
None
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, all individuals known to beneficially own 5%
or more of the Company's common stock, and all officers and directors of the
registrant, with the amount and percentage of stock beneficially owned as of
June 30, 1999:
Name and Address Amount and Nature Percent
of Beneficial Holder of Beneficial Ownership
Michael L. Schumacher (1) 234,552 shares 38.520%
12835 E. Arapahoe, T-II, #110
Englewood, CO 80112
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Terry and Susan R. Seipelt 52,959 shares 8.697%
11330 North Scioto Avenue
Oro Valley, AZ 85737
Jackie Sanders 68,304 shares 11.217%
1301 Electric Avenue
Seal Beach, CA 90740
Harold L. Morris (2) 132,548 shares 21.767%
3991 MacArthur Blvd. #100
Newport Beach, CA 92660
George A. Powell 1,284 shares 2.109%
Vice President and Director
7333 S. Fillmore Circle
Littleton, CO 80122
Norman L. Horsfield 1,128 shares 1.852%
Director
2567 Wilt Road
Fallbrook, CA 92028
James D. Phelps 410 shares .067%
Secretary and Director
4735 S. Kalamath Street
Englewood, CO 80110
Robert S. Benham 628 shares .103%
Director
9273 E. Eastman Place
Denver, CO 80231
Robert F. Moreland 469 shares .077%
Director
12 Parrot Trail
Round Rock, TX 78681
Peter Porath 335 shares .055%
Director
12773 Forest Hill Blvd. #209
Wellington, FL 33414
Officers and directors as a 238,806 shares 39.218%
group (1)
Michael L. Schumacher owns 628 shares individually. In addition, Mr.
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 (Schumacher Plan) which owns 230,399 shares of RMPC.
Shares owned by the Schumacher Plan are considered to be beneficially owned
by Mr. Schumacher. Mr. Schumacher's beneficial ownership also includes the
following shares to be owned by certain relatives of Mr. Schumacher:
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Owner Relationship Number of Shares
Zona Schumacher Spouse 493
Jada Schumacher Daughter 512
Spencer Schumacher Son 512
Quinn Schumacher Son 512
Ralph and Alma Schumacher Parents 183
Roberta and Timothy Weiss Sister and her spouse 164
Constance and Gary Novak Sister and her spouse 164
Cynthia and Greg Becker Sister and her spouse 164
Katheryn and Ken Zeeb Sister-in-law and her spouse 164
Lowell and Ginett Janssen Brother-in-law and his spouse 329
Warren and Cathy Janssen Brother-in-law and his spouse 164
Rachel and Charles Paprocki Sister-in-law and her spouse 164
Total 3,525
Mr. Schumacher disclaims beneficial ownership of an additional 76,703
shares held by the Plan as collateral for promissory notes totaling
approximately $275,000 including accrued interest at June 30, 1999.
The promissory notes are nonrecourse, bear interest at 8% per annum and
are totally due January 6, 2000. Failure to collect the note balances
and accrued interest at that time would result in the Schumacher Plan
obtaining ownership of the 76,703 additional shares.
(2) Harold L. Morris individually owns 64,399 shares of RMPC. In
addition, Harold L. Morris and his spouse, Connie Morris are the sole
beneficiaries of the Harold L. Morris Profit Sharing Plan which owns
34,978 shares of RMPC. Applegates Landing I, a Harold L. Morris family
partnership owns 24,299 shares. Professional Investors, a Utah Limited
Partnership, of which Mr. Morris is a partner, owns 1,679 shares. Mr.
Morris' beneficial ownership also includes the following shares owned by
certain relatives:
Owner Relationship Number of
Shares
Debra L. Morris Daughter 4,796
Gary A. Morris Brother 2,397
-----
Total 7,193
=====
Mr. Morris disclaims beneficial ownership of an additional 68,222 shares
held by Mr. Morris, or entities controlled by him, as collateral for
promissory notes, totaling approximately $251,000 including accrued
interest at June 30, 1999. The promissory notes are nonrecourse, bear
interest at 8% per annum and are totally due January 6, 2000. Failure
to collect the note balances and accrued interest would result in Mr.
Morris, or entities controlled by him, obtaining ownership of the
additional 68,222 shares.
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Section 16(a) Beneficial Ownership Reporting Compliance
To the best knowledge of the Company, all beneficial ownership reports
of officers, directors and holders of 10% of the Company's common stock
have been filed on timely reports.
Item 12. Certain Relationships and Related Transactions
None during the year ended June 30, 1999.
Item 13. Exhibits and Reports on Form 8-K
None
14
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INDEX TO FINANCIAL STATEMENTS
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
FINANCIAL STATEMENTS
June 30, 1999 and 1998
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statement of Changes in F-5
Stockholders' Equity
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-11
F-1
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Rocky Mountain Power Co.
Englewood, CO 80112
We have audited the accompanying consolidated balance sheets
of Rocky Mountain Power Co. and Consolidated Subsidiaries as
of June 30, 1999 and 1998, and the related consolidated
statements of income, changes in stockholders' equity and
cash flows for the years ended June 30, 1999 and June 30,
1998. 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 Rocky Mountain Power Co. and Consolidated
Subsidiaries as of June 30, 1999 and June 30, 1998, and the
results of its operations, changes in stockholders' equity and
its cash flows for the years ended June 30, 1999 and June 30,
1998, in conformity with generally accepted accounting principles.
Miller and McCollom
Certified Public Accountants
7400 W. 14th Avenue
Lakewood, Colorado 80215
September 15, 1999
F-2
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ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
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<CAPTION> June 30, June 30,
1999 1998
<S> <C> <C>
Current Assets:
Cash $ 445,158 $ 70,229
Certificates of purchase, real estate
foreclosures (Note 3) 197,247 799,801
Mortgage notes receivable, current
portion (Note 3) 111,108 301,574
Mortgage note receivable, related
party (Note 3) 139,079 139,079
Deferred income taxes receivable,
current (Note 5) 4,626 4,626
Sale proceeds receivable (Note 7) 246,500 -
Other 26,831 26,685
--------- ---------
Total Current Assets 1,170,549 1,341,994
Real estate, net of accumulated deprec-
iation of $5,500 at June 30, 1999 and
$4,000 at June 30, 1998 (Note 3) 234,817 244,317
Transportation equipment, net of accumulated
depreciation of $6,125 at June 30, 1999
and $3,125 at June 30, 1998 8,875 11,875
Mortgage notes receivable, net of
current portion (Note 3) 795,356 814,010
Deferred income taxes receivable, net
of current portion (Note 5) 53,557 57,213
--------- ---------
TOTAL ASSETS $ 2,263,154 $ 2,469,409
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,158 $ 6,931
Notes payable, current portion (Note 2) 10,005 318,519
Income taxes payable (Note 5) 41,689 39,531
Deferred taxes payable, current portion (Note 5) 2,104 1,621
Accrued expenses and other 24,598 22,243
------ -------
Total Current Liabilities 86,554 388,845
Deferred taxes payable, long term (Note 5) 27,595 35,906
Notes payable, net of current portion (Note 2) 18,872 28,109
------- -------
TOTAL LIABILITIES 133,021 452,860
------- -------
Stockholders' Equity:
Preferred stock, $25.00 par value, 200,000
shares authorized, none issued & outstanding - -
Common stock, $.05 par value, 100,000,000
shares authorized, 608,917 shares issued
and outstanding at June 30, 1999 and
607,853 at June 30, 1998 30,446 30,393
Additional paid-in capital 1,614,435 1,610,988
Retained earnings 485,252 375,168
TOTAL STOCKHOLDERS' EQUITY 2,130,133 2,016,549
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,263,154 $ 2,469,409
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended Year
Ended
June 30, June 30,
1999 1998
<C> <C> <C>
Revenue:
Rent income $ 7,960 $ 26,557
Interest income 150,261 157,838
Management fee income -
38,350
Gain on the sale of real estate 43,570 97,174
Other income 7,293 -
-------- --------
209,084 319,919
-------- --------
Expenses:
Property management fees 660 15,591
Rent - 28,219
Depreciation 4,500 12,250
Interest 3,163 47,401
Real estate taxes and insurance 3,677 9,079
Repairs and maintenance 229 5,101
Professional fees 28,119 21,487
Stock issued for services 3,500 12,386
Other 14,902 30,876
------- -------
58,750 182,390
------- -------
Net income before provision
for income taxes 150,334 137,529
------- -------
Provision for income taxes (Note 5):
Current 41,686 39,531
Deferred (1,436) (2,515)
------- -------
40,250 37,016
------- -------
Net income $ 110,084 $ 100,513
-------- --------
Per Share $ .18 $ .14
======== ========
Weighted Average Shares
Outstanding 608,917 721,364
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From June 30, 1997 through June 30, 1999
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
No./Shares Amount Capital Earnings Total
---------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ 749,742 $ 37,487 $2,065,234 $274,655 $2,377,376
Common stock issued 3,873 194 12,192 - 12,386
Common stock cancelled (145,762) (7,288) (466,438) - (473,726)
Net income for the year
ended June 30, 1998 - - - 100,513 100,513
-------- ------- --------- ------- ---------
Balance at June 30, 1998 607,853 30,393 1,610,988 375,168 2,016,549
Common stock issued 1,064 53 3,447 - 3,500
Net income for the year
ended June 30, 1999 - - - 110,084 110,084
------- -------- --------- -------- ---------
Balance at June 30, 1999 608,917 $ 30,446 $1,614,435 $ 485,252 $2,130,133
======= ======== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Year ended
June 30, June 30,
1999 1998
Cash Flows Operating Activities:
<S> <C> <C>
Net income $ 110,084 $ 100,513
Depreciation 4,500 12,250
Stock issued for services 3,500 -
Increase in income taxes payable 2,158 23,371
(Decrease) in deferred income taxes payable (4,172) (2,515)
Increase in accounts payable and accrued
expenses 3,582 8,293
(Gain) on sale of assets - (78,947)
-------- -------
Net Cash Provided by Operating Activities 119,652 62,965
-------- -------
Cash Flows from Investing Activities:
(Increase) in sales proceeds receivable (246,500) -
Collection of (Investments in) certificates
of purchase 602,554 (233,224)
Collection of notes receivable 485,666 564,554
(Investment) in mortgage notes receivable (276,546) (255,240)
Disposition of real estate 8,000 37,877
Other (146) 154,273
-------- --------
Net Cash Provided by Investing Activities 573,028 268,240
-------- --------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital - 12,386
(Repayment) of notes payable (7,851) (1,282,793)
Loan from bank 2,565,004 -
(Repayment) of loan from bank (2,774,904) -
(Repayment) of loan from related party (100,000) (150,000)
--------- --------
Net Cash Provided by
Financing Activities (317,751) (1,420,407)
--------- ---------
Increase (decrease) in Cash 374,929 (1,089,202)
Cash, Beginning of Period 70,229 1,159,431
--------- ---------
Cash, End of Period $ 445,158 $ 70,229
========= ==========
Interest Paid $ 3,163 $ 47,401
========= ==========
Income Taxes Paid $ 42,846 $ 16,122
========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(1) Summary of Accounting Policies
------------------------------
This summary of significant accounting policies of Rocky
Mountain Power Co. (RMPC) and its wholly-owned subsidiary,
Prime Rate Income & Dividend Enterprises, Inc. (PRIDE) and
Birch Branch, Inc., and GAP Enterprises, Inc., wholly-owned
subsidiaries of PRIDE is presented to assist in understanding
the Company's financial statements. The financial statements
and notes are representations of the Company's management who
is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation
of the financial statements.
(a) Organization and Principles of Consolidation
--------------------------------------------
The consolidated financial statements include the accounts of
the companies listed above. 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 June 30 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. Depreciation on rental
real estate is being 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 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.
F-7
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(1) Summary of Accounting Policies, Continued
------------------------------------------
(e) Geographic Area of Operations and Interest Rates
------------------------------------------------
The Company owns properties principally in California, Nebraska,
North Dakota, Florida and Arkansas. 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) Notes Payable
-------------
As of June 30, 1999 the Company had outstanding $28,877 on a
note payable bearing interest at 15%. Maturities of this note
payable is summarized as follows:
Year ending June 30,
2000 $ 10,005
2001 11,614
2002 7,258
2003 -
Thereafter -
Total $ 28,877
This note is due in monthly installments of $1,129 through December,
2002. This note is not collateralized by any assets of the Company.
Also included in notes payable at June 30, 1998, was $209,900
payable to a bank collateralized by certain mortgage notes
receivable and certificates of purchase. This note was paid
in full during the year ended June 30, 1999. The terms of
the bank loan are more fully disclosed in Note 6. In
addition, the Company had a $100,000 note payable to a
shareholder which was uncollateralized and was paid in full
during the year ended June 30, 1999.
F-8
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(3) Concentration of Credit Risk
----------------------------
The Company's material concentration of credit risk consists
principally of investments in mortgage loans and certificates of
purchase. The Company's investments in mortgage loans are
collateralized principally by first or second deeds of trust on
real estate located primarily in Colorado, Arizona and California.
At June 30, 1999, the Company had seven mortgage loans receivable
from one individual totaling approximately $87,243. The loans as
a percentage of value were approximately 90% at the time of sale.
The Company also had seventeen mortgage loans receivable from
another individual totaling approximately $565,497. The second
individual's loans as a percentage of value were approximately
100% at the time of sale but, as additional collateral for the
loans receivable from this individual, the Company has a junior
lien on another property owned by this individual. The
weighted average interest rate on mortgagee notes receivable is
approximately 8% per annum with monthly repayment terms being
amortized over periods up to twenty years.
The Company has one investment in a foreclosure certificate of
purchase totaling $197,247 as of June 30, 1999. This certificate
of purchase entitles the Company to receive interest at the
original foreclosed mortgage loan rate over the redemption period,
which is generally 75 days, or title to the property if not
redeemed within the redemption period. The interest rate on the
Company's investment in certificate of purchase was 30%.
Subsequent to June 30, 1999, the Company obtained title to the
property that was subject to the certificate of purchase.
Effective March 31, 1998, the Company sold its investment in
a health club/racquetball building to the shareholder that
originally contributed the property for stock. The gross
proceeds to the Company were 145,762 shares of the Company's
common stock and a mortgage note receivable of $139,079
collateralized by the property. This note bears interest at 8%
per annum and is totally due on March 31, 2000. The Company
recognized a gain on this sale of $78,947. The shares of stock
returned to the Company were recorded at net book value,
cancelled and returned to authorized but unissued stock.
F-9
<PAGE>
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of temporary
cash investments. The Company places its temporary cash
investments with financial institutions. As of June 30, 1999,
the Company had a concentration of credit risk since it had
temporary cash investments in bank accounts totalling $309,112
in excess of the FDIC insured amounts.
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(4) Fair Value Financial Instruments
--------------------------------
As of June 30, 1999, 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.
(5) Income Taxes
-------------
A reconciliation between the expected income tax provision
computed at a federal statutory rate of 39% and the actual
income tax provision follows:
Year Year
Ended Ended
June 30, June 30,
1999 1998
Expected income tax $ 58,630 $ 53,636
Graduated tax brackets (16,750) (16,750)
Benefit of utilization of net
operating loss carryover (4,626) (4,626)
State tax net of federal
benefit 4,584 4,194
Other, net (1,588) 562
------- -------
$ 40,250 $ 37,016
======= =======
The tax effects of temporary differences that give rise to
the deferred tax liability at June 30, 1999 follow:
Installment sale reporting $ 29,699
less current portion (2,104)
--------
$ 27,595
========
The change in the deferred tax liability during the year ended June
30, 1999 was $8,311.
As of June 30, 1999 RMPC had $58,183 of deferred tax assets related
to net operating loss carryovers. RMPC had useable loss carryovers
of approximately $200,000 at the time of the business combination,
expiring in various years through the year 2017. Due to a change
in ownership of RMPC the net operating loss carryover has been
reduced from approximately $540,000 to approximately $200,000, of
which $24,750 has been utilized by the Company since the change of
ownership.
F-10
<PAGE>
ROCKY MOUNTAIN POWER CO.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(6) Notes Payable, Bank
--------------------
As of June 30, 1999, the Company had a line of credit from a bank
of $1,500,000.
The Company's President has personally guaranteed the total
$1,500,000 balance of the notes payable and has assigned to the
bank a life insurance policy with a $500,000 death benefit as
additional collateral.
The Company has agreed to provide annual audited financial
statements to the bank. The terms of the loan agreement require
that the Company maintain a debt to tangible net worth ratio not
to exceed one to one, a debt service coverage ratio of greater
than 1.25 to one and a current ratio of greater than one to one.
The line of credit is collateralized by certain real estate
mortgage notes receivable and certificates of purchase, and
bears interest at .5% over prime plus has an annual fee of .5%
of the total amount of the line. The line of credit is subject
to annual renewal and is due in December, 1999. At June 30,
1999, the Company had no outstanding borrowing on this line of
credit.
(7) Sale Proceeds Receivable
-------------------------
Effective June 30, 1999, the Company sold a real estate property
resulting in a receivable of $246,500. During July, 1999 the
Company received the $246,500 in cash.
(8) Year 2000 Compliance
---------------------
The Company is aware of the issues associated with the programming
code in existing computer systems as the year 2000 approaches.
The Company has assessed these issues as they relate to the
Company, and since the Company currently has no operating business
and does not use any computers, and since it has no customers or
supplier, it does not believe that there are any material year 2000
issues to disclose in this Report.
F-11
<PAGE>
SIGNATURES
In accordance with Section 13 of 15(d) of the Securities Exchange Act
of 1934, the Company has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Registrant) ROCKY MOUNTAIN POWER CO.
(Date) September 22, 1999
By:(Signature) /s/ Michael L. Schumacher
(Name and Title) Michael L. Schumacher
President, Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated:
Signature Capacity
Date
/s/ Michael L. Schumacher President, Chief Executive Officer 9/22/99
Michael L. Schumacher and Chief Financial Officer
/s/ George A. Powell Vice President and Director
George A. Powell
James Phelps Secretary and Director
James Phelps
/s/ Robert S. Benham Director
Robert S. Benham
/s/ Peter Porath Director
Peter Porath
Director
Robert F. Moreland
Director
Norman L. Horsfield
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages F-1 ex seq. of
the Company's Form 10-K for the fiscal year ended June 30, 1999, and is
qualified in its entierty by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 445,158
<SECURITIES> 0
<RECEIVABLES> 554,835
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,170,544
<PP&E> 255,317
<DEPRECIATION> 11,625
<TOTAL-ASSETS> 2,263,154
<CURRENT-LIABILITIES> 86,554
<BONDS> 0
608,917
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,263,154
<SALES> 0
<TOTAL-REVENUES> 209,084
<CGS> 0
<TOTAL-COSTS> 58,750
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,163
<INCOME-PRETAX> 150,334
<INCOME-TAX> 40,250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,084
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
