UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended APRIL 30, 2000 Commission File Number 0-28759
REAL ESTATE OPPORTUNITIES, INC.
(Exact name of registrant as specified in its charter)
COLORADO
84-1461919
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3225 E SECOND AVENUE, DENVER, COLORADO 80206
(Address of principal executive offices) (Zip code)
(303) 393-1600
(Registrant's telephone number, including area code)
MONUMENT GALLERIES, INC.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,560,602
Class Number of shares outstanding at June 14, 2000
This document is comprised of 10 pages.
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FORM 10-QSB
1ST QUARTER
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements*
Condensed, consolidated balance sheet - April 30, 2000 (Unaudited)...........3
Condensed, consolidated statements of operations - Three months ended
April 30, 2000 and 1999, and May 15, 1998 (inception)
Through April 30, 2000 (Unaudited)................................... 4
Condensed, consolidated statements of cash flows - Three months ended
April 30, 2000 and 1999, and May 15, 1998 (inception)
Through April 30, 2000 (Unaudited)....................................5
Notes to condensed, consolidated financial statements (Unaudited)............6
Item 2. Plan of operation ...................................................8
PART II - OTHER INFORMATION
Item 1. Legal proceedings...................................................9
Item 2. Changes In Securities ..............................................9
Item 3. Defaults Upon Senior Securities ....................................9
Item 4. Submission of Matters To A Vote of Security Holders.................9
Item 5. Other Information ..................................................9
Item 6. Exhibits and Reports on Form 8-K ...................................9
Signatures .................................................................10
* The accompanying financial statements are not covered by an Independent
Certified Public Accountant's report.
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REAL ESTATE OPPORTUNITIES, INC.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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ASSETS
Current assets:
Cash........................................... $ 8,802
Notes receivable, net ....................... 65,394
Other receivables, net ..................... 85
Prepaid expenses.............................. 8,000
Total current assets ............ 82,281
Intangible assets (Note 2)......................... 603,187
$ 685,468
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................... $ 8,060
Accrued interest payable ...................... 14,873
Short term debt .............................. 46,592
Current maturities long term debt............ 21,500
Total current liabilities ...... 91,025
Long-term debt (Note 4) ......................... 646,010
Total liabilities..................... 737,035
Commitments ................................ -
Shareholders' deficit:
Common stock ....................... 6,185
Additional paid-in capital................. 111,439
Retained deficit............................ (169,191)
Total shareholders' deficit .......... (51,567)
$
685,468
The accompanying notes are an integral part of the condensed, consolidated
financial statements.
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REAL ESTATE OPPORTUNITIES, INC.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C>
For the Three Months Ended
April 30,
2000 1999
Revenues.....................$ 217 $ -
Operating expenses:
General and administrative 19,807 -
General and administrative-stock
based compensation. 3,600 -
General and administrative,
related parties(Note 3) 6,500 -
Total operating expenses 29,907 -
Loss before interest and
provision for income tax. $ (29,690) $ -
Interest expense ............. 15,909 -
Loss before provision for
income taxes (45,599) -
Provision for income taxes
(benefit) (Note 4) - -
Net loss.............$ (45,599) $ -
The accompanying notes are an integral part of the condensed, consolidated
financial statements.
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REAL ESTATE OPPORTUNITIES, INC.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C>
For the Three Months Ended
April 30,
2000 1999
Net cash used in operating activities $ (35,708) $ -
Investing activities:
Cash paid for rights to future revenues
from the sale of common stock,
acquired from a related party (26,480) -
Cash paid for rights to future revenues
from a certain note receivable,
acquired from a related party (14,430) -
Cash paid for rights to future revenues
from real estate development,
acquired from a related party (92,154) -
Net cash used in investing activities (133,064) -
Financing activities:
Principle payments to related
party on notes payable (26,490) -
Proceeds from the sale of common stock,
net of offering costs 200,064 -
Net cash provided from
financing activities 177,574 -
Net change in cash..... 8,802 -
Cash at beginning of period - -
Cash at end of period $ 8,802 $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest .......... $ 1,036 $ -
Income taxes ...... $ 1,036 $ -
Noncash financing activities:
Common stock issued for property. $ 253,000 $ -
Common stock issued for debt $ 12,732 $ -
The accompanying notes are an integral part of the condensed, consolidated
financial statements.
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REAL ESTATE OPPORTUNITIES, INC.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial statements presented herein have been prepared by the Company
in accordance with the accounting policies in its annual 10-KSB report
dated January 31, 2000 and should be read in conjunction with the notes
thereto. The Company entered the development stage in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 7 on May 15, 1998
and its purpose is to evaluate, structure and complete a merger with, or
acquisition of, a privately owned corporation.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation
of operating results for the interim period presented have been made. The
results of operations for the periods presented are not necessarily
indicative of the results to be expected for the year.
On April 6, 2000, FKJ Opportunities, Inc. exchanged 100 percent of its
outstanding shares of common stock for 5, 432,977 shares of the common
stock of Real Estate Opportunities, Inc. This acquisition has been treated
as a recapitalization of FJK Opportunities, Inc., a Colorado corporation,
with Real Estate Opportunities, Inc. the legal surviving entity. Since
Real Estate Opportunities, Inc. had, prior to the recapitalization, minimal
assets (consisting principally of cash and receivables) and no operations,
the recapitalization has been accounted for as the sale of 1,127,625 shares
of common stock for the net assets of Real Estate Opportunities, Inc.
Costs of the transaction have been charged to the period. The
recapitalization took place on April 6, 2000; however, the condensed,
consolidated financial statements have been prepared as if the
recapitalization took place on April 1, 2000.
Interim financial data presented herein are unaudited.
NOTE 2: INTANGIBLE ASSETS
Intangible assets consisted of the following at April 30, 2000:
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Rights to interest in commercial real estate acquired
from related party ..................... $ 30,526
Rights to interest in residential real estate development
including water rights, from related party.... 480,909
Rights to interest in proceeds from the sale of
American Tire Corporation common stock.... 91,752
$ 603,187
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REAL ESTATE OPPORTUNITIES, INC.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3: RELATED PARTY TRANSACTIONS
During the three months ended April 30, 2000 the Company:
(a)The Company rented office space from an affiliate during the quarter to
which this Quarterly Report is filed. Total cost was $2,400 for the
quarter.
(b)The Company paid an affiliate $600 for accounting services during the
quarter to which this Quarterly Report is filed.
(c)The Company paid an affiliate $6,000 for consulting services related to
real estate property investments during the quarter to which this
Quarterly Report relates.
(d)On April 3, 2000 and April 12, 2000, the Company acquired a 10 percent
interest in certain real property from Platinum Financial Fund LLC for
$12,600 and $15,000, respectively, bringing the Company's total interest
in the real property to approximately 41 percent as of April 30, 2000.
NOTE 4: LONG-TERM DEBT
Notes payable, related parties consists of the following as of April 30,
2000:
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Note payable to Asset Realization, Inc. (an affiliate),
collateralized by a first deed of trust, at 13.5 percent interest,
with interest due August 1, 2000 and $46,045
due August 1, 2001....................... $ 40,261
Note payable to Krupka-Brophy Profit Sharing plan (an affiliate),
collateralized by a first deed of trust, at 9 percent interest,
with semi-annual payments of $39,730 and a balloon payment
of $503,410 due February 3, 2002 ........ 513,960
554,221
Less current maturities 15,779
$ 538,442
Notes payable, other consists of the following as of April 30, 2000:
Note payable to an unrelated third-party, collateralized by a
first deed of trust, at 13.5 percent interest, with semi-annual
payments of $6,338 and a balloon payment of $32,971
due February 3, 2002.................. $ 38,387
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REAL ESTATE OPPORTUNITIES, INC.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note payable to an unrelated third-party, collateralized by a
first deed of trust, at 13.5 percent interest, with semi-annual
payments of $5,363 and a balloon payment of $53,520
due February 3, 2002 ................ 53,402
91,789
Less current maturities............. 5,721
$ 86,068
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Aggregate maturities required on long-term debt at April 30, 2000 as
follows:
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2001......................................... $ 21,500
2002........................................ 11,017
2003......................................... 634,993
$ 667,510
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NOTE 5: INCOME TAXES
The Company records its income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes". The
Company incurred net operating losses during the three months ended April
30, 2000 resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $0 income taxes.
NOTE 6: SHAREHOLDERS' DEFICIT
A reconciliation of the number of shares of the Registrant's common stock
outstanding, after the recapitalization described in Note 1, is as follows:
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January 31, 2000 balance ...................... 751,750
April 4, 2000 common stock dividend ............. 375,875
Number of shares of common outstanding prior to
recapitalization................................ 1,127,625
April 6, 2000 exercise of common stock options . 200,000
April 6, 2000 number of shares issued in
recapitalization ............................ 5,232,977
Number of shares outstanding after the acquisition 6,560,602
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PART 1. FINANCIAL INFORMATION
ITEM 2. PLAN OF OPERATION
Organized on January 1, 2000, we acquired Monument Galleries, Inc., in a
reverse acquisition, on April 6, 2000. We are in the real estate
opportunities business. Monument Galleries, Inc. was in the retail arts
and craft industry before selling that business back to its principle
shareholders and merging with us.
In January 2000, we acquired a 26 percent interest in Platinum Financial
Fund LLC's ("Platinum") share of its interest in certain commercial real
property for $25,674 and 50,000 shares of the Company's $.001 par value
common stock. The property is located in Denver, Colorado. In March 2000,
we acquired an additional 5 percent from an unrelated third party in
exchange for 36,665 shares of our common stock. In April 2000, we acquired
an additional 10 percent in Platinum's interest in the property from
Platinum for $27,600 bringing our total interest in Platinum's interest to
approximately 41 percent as of April 30, 2000. Platinum is an affiliate
and it holds a one-third interest in the property. That interest entitles
Platinum to one-third of the rental income and management fees from the
property and one-third of the net proceeds from the sale of the property.
We recorded the related party transactions at Platinum's historical cost
because of the affiliated relationship. During the period from January 20,
2000 through April 30, 2000, we received $132 and $-0-, respectively in
rent and management fees. The current plan is to develop the property into
condominiums in 2001, subject to the availability of financing.
In addition, during the quarter, we acquired a Promissory Note (the "Note")
from Platinum for $14,430 and 100,000 shares of our $.001 par value common
stock. We also assumed three related debt obligations totaling $59,289
when we acquired the Note. We are liable under the debt obligations only
to the extent that we receive proceeds from the Note. The Note, which is
collateralized by real property, was in default at the time we acquired it
from Platinum. The Note has a face value of $82,000. We recorded the Note
at Platinum's historical cost and subsequently wrote the Note down to its
net realizable value at March 31, 2000 based on our share of the underlying
collateral. In May 2000, we received a Trustee's Certificate of Sale in the
amount of $103,101. Our plan is to sell the collateral (unless the Note is
redeemed) and retire the debt obligations.
On February 3, 2000, we entered into a purchase agreement to acquire the
rights to certain land and water rights held for development. We acquired
the rights from the Krupka-Brophy Profit Sharing Plan (the "Plan") for
$65,000 and debt, payable to the Plan and to Asset Realization, Inc. (ARI),
totaling $690,000. The Plan and ARI are affiliates. We recorded these
transactions at the affiliate's historical cost. The present plan is to
develop this property and to sell to builders, beginning in 2001. Proceeds,
if any, from our interest in the property will be used to retire the debt.
There is no assurance that the development will take place or be
profitable.
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On February 3, 2000, we acquired the right to the proceeds from the sale of
3,888 shares of American Tire Corporation (ATC) common stock from Platinum
for $11,480. On February 18, 2000, we acquired an additional right to the
proceeds from the sale of 64,000 shares of ATC common stock from Platinum
for $15,000 and the issuance of 1.5 million shares of the Company's $.001
par value common stock. The ability to sell the ATC shares is subject to
Rule 144 of the Securities Act of 1933, as amended. Once this restriction
is lifted (September 2000, at the earliest), we plan to sell all or a
portion of our holdings. Proceeds from the sale will be used to fund
current and future projects. The ATC stock is traded in the over-the-
counter market and its price fluctuates. We have not lined up a buyer for
the stock, once the Rule 144 restriction is lifted. As of June 15, 2000
the closing price of the ATC stock was $2.81, per share.
This is our first quarter of operations as a real estate opportunities
business. We conducted minimal income producing operations during the
quarter for which this Quarterly Report is filed. Our expenses consisted
principally of accounting, legal, and interest expense. We were not in
existence during the year earlier period.
We sold founder's shares to friends and relatives which provided $89,010
and we commenced a private offering of 1 million shares of our common
stock, at $.15 per share, on March 15, 2000, which we sold out in one day.
The stock sales provided capital totaling $200,064, net of the costs of the
private offering. Our balance sheet reflected notes payable totaling
$646,010 and short-term debt of $46,592 at April 30, 2000. Since the notes
payable mature over three years (with most of the principle due in the
third year), we plan to use the proceeds from lot sales to retire the debt.
Our short-term debt obligations, totaling $46,592, will be retired only to
the extent that we receive proceeds from the sale of the collateral or if
the Note is redeemed. During the quarter ended April 30, 200, we made
principle payments on note payable totaling approximately $22,500 to the
affiliates noted above. For the foreseeable future, our liquidity and
financial health will be dependent upon the success or failure of our
rights.
PART II - OTHER INFORMATION
Items 1 Through 5 - No response required.
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits
27* Financial Data Schedule.
(b) Reports on Form 8-K were filed on:
None
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REAL ESTATE OPPORTUNITIES, INC.
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all
adjustments (only consisting of normal recurring accruals) necessary for a
fair presentation of the results of operations for the three months ended
April 30, 2000 have been included.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REAL ESTATE OPPORTUNITIES, INC.
(formerly Monument Galleries, Inc.)
(Registrant)
DATE: June 29, 2000 BY: /S/ F. JEFFREY KRUPKA
