<PAGE>
FORM 10-QSB - Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended December 31, 1999
---------------------
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from to
--------------- ------------
Commission File Number 0-27513
---------------
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1308436
------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
12835 E. Arapahoe Road, T-II, Ste. 110, Englewood, CO 80046
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 792-2466
--------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark 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.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of December 31, 1999, Registrant had 611,290 shares of common stock, $1.00
par value, outstanding.
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item I. Financial Statements
Balance Sheets as of December 31, 1999
(Unaudited) and June 30, 1999 2
Statement of Income, Three Months
Ended December 31, 1999 and
December 31, 1998 (Unaudited) 3
Statement of Income, Six Months
Ended December 31, 1999 and
December 31, 1998 (Unaudited) 4
Statement of Cash Flows, Three Months
Ended December 31, 1999 and
December 31, 1998 (Unaudited) 5
Statement of Cash Flows, Six Months
Ended December 31, 1999 and
December 31, 1998 (Unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 8
Part II. Other Information 10
1
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
------------- ------------
<S> <C> <C>
Current Assets:
Cash $ 545,441 $ 445,158
Certificates of purchase, real estate
foreclosures - 197,247
Mortgage notes receivable, current
portion 121,100 111,108
Mortgage note receivable, related party 139,079 139,079
Sale proceeds receivable - 246,500
Other 26,911 26,831
------------ -----------
Total Current Assets 832,531 1,165,923
Real estate, net of accumulated deprec-
iation of $6,250 at December 31, 1999 and
$5,500 at June 30, 1999 234,067 234,817
Transportation equipment, net of accumulated
depreciation of $7,625 at December 31, 1999 and
$6,125 and June 30, 1999 7,375 8,875
Mortgage notes receivable, net of current portion 653,859 795,356
Note receivable, officer 460,234 -
----------- -----------
TOTAL ASSETS $ 2,188,066 $ 2,204,971
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 3,624 $ 8,158
Notes payable, current portion 10,005 10,005
Income taxes payable 9,821 41,689
Deferred taxes payable, current portion 2,104 2,104
Other 22,511 24,598
----------- -----------
Total Current Liabilities 48,065 86,554
Deferred taxes payable, long term 27,595 27,595
Notes payable, net of current portion 14,115 18,872
----------- -----------
TOTAL LIABILITIES 89,775 133,021
----------- -----------
Stockholders' Equity:
Preferred stock, $10.00 par value, 1,000,000
shares authorized, none issued & outstanding - -
Common stock, $1.00 par value, 10,000,000
shares authorized, 611,290 shares issued
and outstanding at December 31, 1999 and
611,290 shares at June 30, 1999 611,290 611,290
Additional paid-in capital 983,511 975,408
Retained earnings 503,490 485,252
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 2,098,291 2,071,950
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,188,066 $ 2,204,971
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Rent income 1,650 5,250
Interest income 28,023 41,397
(Loss) on disposition of asset (Note 2) (3,534) 2,681
------- ------
26,139 49,328
------ ------
Operating Expenses:
Depreciation 1,125 1,636
Interest 1,012 257
Contract services 1,384 -
Auditing and accounting 894 5,190
Other 5,161 3,946
----- ------
9,576 11,029
----- ------
Net income before provision
for income taxes 16,563 38,299
Provision for income taxes 6,311 13,194
------ ------
Net income $ 10,252 $ 25,105
=========== ===========
Per Share $ .02 $ .04
=========== ===========
Weighted Average Shares Outstanding 611,290 608,916
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Rent income 3,300 9,460
Interest income 46,571 69,325
(Loss) on disposition of asset (Note 2) (3,534) 2,759
Other income 1,139 6,400
------ ------
47,476 87,944
------ ------
Operating Expenses:
Depreciation 2,250 2,761
Interest 2,066 257
Contract services 1,384 2,095
Auditing and accounting 894 9,615
Directors fees 3,500 -
Other 9,323 8,527
------ ------
19,417 23,255
------ ------
Net income before provision
for income taxes 28,059 64,689
Provision for income taxes 9,821 22,490
------ ------
Net income $ 18,238 $ 42,199
=========== ===========
Per Share $ .03 $ .07
=========== ===========
Weighted Average Shares Outstanding 611,290 608,916
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows Operating Activities:
Net income $ 10,252 $ 25,105
Depreciation 1,125 1,636
(Decrease) in income taxes payable (10,378) (5,652)
(Decrease) in accounts payable and
accrued expenses (8,476) (2,800)
Other 249 16,127
------- ------
Net Cash Provided by Operating Activities (7,228) 34,416
------- ------
Cash Flows from Investing Activities:
Proceeds from redemptions of certificates
of purchase 197,247 432,360
(Investment) in property and equipment - (511)
Collection of notes receivable 65,930 35,978
(Investment) in note receivable, officer (460,234) -
--------- -------
Net Cash Provided by Investing Activities (197,057) 467,827
--------- -------
Cash Flows from Financing Activities:
Proceeds from bank notes payable - 20,000
(Repayment of) bank notes payable - (485,886)
(Repayment of) mortgage notes payable (2,423) (1,985)
------- -------
Net Cash (Used in) Financing Activities (2,423) (467,871)
------- ---------
Increase (decrease) in Cash (206,708) 34,372
Cash, Beginning of Period 752,149 39,667
------- ------
Cash, End of Period $ 545,441 74,039
=========== ===========
Interest Paid $ 1,012 $ 6,448
=========== ===========
Income Taxes Paid $ 7,020 $ 18,321
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows Operating Activities:
Net income $ 18,238 $ 42,199
Depreciation 2,250 2,761
(Decrease) in income taxes payable (31,868) (19,831)
(Decrease) in accounts payable and
accrued expenses (4,534) (1,599)
Stock issued for services 3,500 -
Other (2,202) 17,558
------------ -----------
Net Cash Provided by Operating Activities (14,616) 41,088
------------ -----------
Cash Flows from Investing Activities:
(Investments) in certificates of purchase - (1,174,401)
Proceeds from redemptions of certificates
of purchase 197,247 727,140
(Investment) in property and equipment - (511)
Collection of notes receivable 131,505 90,251
Collection of sale proceeds receivable 246,500 -
(Investment) in note receivable, officer (460,234) -
------------ ------------
Net Cash Provided by Investing Activities 115,018 (357,521)
------------ ------------
Cash Flows from Financing Activities:
Issuance of common stock 4,638 -
Proceeds from bank notes payable - 810,100
(Repayment of) bank notes payable - (485,886)
(Repayment of) mortgage notes payable (4,757) (3,971)
------------ ------------
Net Cash (Used in) Financing Activities (119) 320,243
------------ -----------
Increase in Cash 100,283 3,810
Cash, Beginning of Period 445,158 70,229
----------- -----------
Cash, End of Period $ 545,441 74,039
=========== ===========
Interest Paid $ 2,066 $ 9,136
=========== ===========
Income Taxes Paid $ 32,020 $ 42,321
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Unaudited)
(1) Condensed Financial Statements
------------------------------
The financial statements included herein have been prepared by
Prime Rate Income & Dividend Enterprises, Inc. without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such
rules and regulations, and Prime Rate Income & Dividend
Enterprises, Inc. believes that the disclosures are adequate to
make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the
June 30, 1999 audited financial statements and the accompanying
notes thereto. While management believes the procedures followed
in preparing these financial statements are reasonable, the
accuracy of the amounts are in some respect's dependent upon the
facts that will exist, and procedures that will be accomplished
by Prime Rate Income & Dividend Enterprises, Inc. later in the
year.
The management of Prime Rate Income & Dividend Enterprises, Inc.
believes that the accompanying unaudited condensed financial
statements contain all adjustments (including normal recurring
adjustments) necessary to present fairly the operations and cash
flows for the periods presented.
7
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Prime Rate Income & Dividend Enterprises, Inc. (the "Company") was
organized as a Colorado corporation on May 1, 1995. 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. Certain statements in
the Report are forward-looking. Actual results of future events could
differ materially.
The following discussion of the financial condition and results of
operations of the Company relates to the three (3) months ended
December 31, 1999 and 1998, and should be read in conjunction with the
financial statements and notes thereto included elsewhere in this
Report. The Company was a relatively inactive public shell
corporation for the two years preceding the business combination with
Prime Rate Investment Management Enterprises, Inc. (PRIME) effective
September 30, 1997. Since the controlling shareholders of PRIME
control RMPC after the business combination, the transaction was
accounted for as a reverse acquisition. The financial statements of
PRIME are presented in this filing since for accounting purposes PRIME
is the acquiring entity. Effective April 30, 1997, PRIME was merged
into RMPC with Prime Rate Income & Dividend Enterprises, Inc. (PRIDE),
a wholly-owned subsidiary of PRIME becoming a wholly-owned subsidiary
of RMPC. PRIDE is the operating company and RMPC is principally a
holding company. The Company has selected June 30 as its fiscal year
end.
Results of Operations
- ---------------------
Revenue for the three and six month periods ended December 31, 1999
decreased from the three and six month periods ended December 31, 1998
as follows:
1998 1999 Decrease
-------- -------- --------
Three Months Ended December 31, $ 49,328 $ 26,139 $ 23,189
Six Months Ended December 31, $ 87,944 $ 47,476 $ 40,468
Revenue decreased principally due to a decrease in mortgage notes
receivable. Rent income during the six month period ended December
31, 1999 was $3,300 as compared to $9,460 during the six month period
ended December 31, 1998, a decrease of $6,160 due to a decrease in
rental real estate owned.
Operating expenses were $11,029 during the three month period ended
December 31, 1998 as compared to $9,576 during the three month period
ended December 31, 1999. Operating expenses were $23,255 during the
six month period ended December 31, 1998 as compared to $19,417 during
the six month period ended December 31, 1999. Operating expenses
decreased principally due to the decrease in auditing and accounting
services paid.
8
<PAGE>
Net income after provision for income taxes amounted to $16,563 during
the three month period ended December 31, 1999 as compared to $38,299
during the three month period ended December 31, 1998, a decrease of
$21,736. Net income after provision for income taxes amounted to
$18,238 during the six month period ended December 31, 1999 as
compared to $42,199 during the six month period ended December 31,
1998, a decrease of $23,961.
Liquidity and Capital Resources
- -------------------------------
Working capital was $784,466 at December 31, 1999 as compared to
$1,079,369 at June 30, 1999. The Company's stockholders' equity was
$2,098,291 at December 31, 1999 as compared to $2,071,950 at June 30,
1999. The increase in stockholders' equity related principally to the
net income recognized for the six months ended December 31, 1999. The
Company has made no commitments that would require any material
increase in capital resources. The Company's financial condition has
not been affected by the modest inflation of the recent past. The
Company believes that future inflation, if any, would not materially
affect the results of operations, other than interest rates on the
line of credit which are based on a floating rate over prime would be
higher. Also the values and rental rates on the Company's real estate
could be affected by future inflation, in any.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
EX-27 Financial Data Schedule
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
BY(Signature) /s/Michael L. Schumacher
(Date) February 22, 2000
(Name and Title) Michael L. Schumacher, Chief Executive
Officer and Principal Accounting Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summarry financial information extracted from the
balance sheet and statements of operations found on pages 2 and 3 of
the Company's Form 10-QSB for the quarter ended 12/31/99, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 545,441
<SECURITIES> 0
<RECEIVABLES> 260,179
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 832,531
<PP&E> 240,317
<DEPRECIATION> 6,250
<TOTAL-ASSETS> 2,188,066
<CURRENT-LIABILITIES> 48,065
<BONDS> 0
0
0
<COMMON> 611,290
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,188,066
<SALES> 0
<TOTAL-REVENUES> 26,139
<CGS> 0
<TOTAL-COSTS> 9,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,012
<INCOME-PRETAX> 16,563
<INCOME-TAX> 6,311
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,252
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
