<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 September 30, 2000
------------------
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
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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
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(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.)
2525 Fifteenth Street, Suite 3H, Denver, CO 80211
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 480-5037
----------------------------------------------------
(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 November 14, 2000, Registrant had 1,304,984 shares of common stock,
$1.00 par value, outstanding.
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item I. Financial Statements
Review Report of Independent
Certified Public Accountant 2
Consolidated Balance Sheets as of
September 30, 2000 (Unaudited) and
June 30, 2000 3
Consolidated Statements of Income,
Three Months Ended September 30, 2000
and September 30, 1999 (Unaudited) 4
Consolidated Statements of Cash Flows,
Three Months Ended September 30, 2000
and September 30, 1999 (Unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 10
Part II. Other Information 12
EX-27 Financial Data Schedule 13
1
<PAGE>
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
--------------------------------------------------------
The Board of Directors
Prime Rate Income and Dividend Enterprises, Inc.
Denver, Colorado 80211
We have reviewed the accompanying consolidated balance sheet of Prime Rate
Income and Dividend Enterprises, Inc. as of September 30, 2000, and the
related consolidated statements of income and cash flows for the three
months then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is
the representation of the management of Prime Rate Income and Dividend
Enterprises, Inc.
A review of interim financial statements consists principally of inquiries of
Company personnel responsible for financial matters and analytical procedures
applied to financial data. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
/s/ Miller and McCollom
Miller and McCollom
Certified Public Accountants
7400 West 14th Avenue, Suite 10
Lakewood, CO 80215
November 14, 2000
2
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------- ---------
<S> <C> <C>
Current Assets:
Cash $ 276,913 $ 414,390
Mortgage notes receivable, current portion 206,279 148,743
Note receivable, current portion 11,605 9,284
Deferred tax 320,939 187,374
Investment in marketable securities 780,164 1,078,628
Other 36,256 7,833
--------- ---------
Total Current Assets 1,632,156 1,846,252
Real estate, net of accumulated deprec-
iation of $14,917 at September 30, 2000 and
$11,714 at June 30, 2000 538,314 539,708
Equipment and furnishings, net of accumulated
depreciation of $720 at September 30, 2000
and $480 at June 30, 2000 17,637 4,320
Transportation equipment, net of accumulated
depreciation of $9,875 at September 30, 2000 and
$9,125 and June 30, 2000 5,125 5,875
Mortgage notes receivable, net of current portion 555,333 608,946
Note receivable, net of current portion 307,044 309,365
----------- -----------
TOTAL ASSETS $ 3,055,609 $ 3,314,466
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 46,610 $ 44,395
Notes payable, current portion 21,361 19,382
Income taxes payable 42,143 117,951
Deferred taxes payable, current portion 269,267 279,029
Accrued expenses and other 39,101 36,438
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Total Current Liabilities 418,482 497,195
Deferred taxes payable, long term 27,595 17,833
Notes payable, net of current portion 189,277 195,654
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TOTAL LIABILITIES 635,354 710,682
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Stockholders' Equity:
Preferred stock, $10.00 par value, 1,000,000
shares authorized, none issued & outstanding - -
Common stock, $1.00 par value, 200,000,000
shares authorized, 1,304,984 shares issued
and outstanding 1,304,984 1,304,984
Additional paid-in capital 493,346 493,346
Depreciation of marketable securities (507,075) (319,043)
Retained earnings 1,129,000 1,124,497
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TOTAL STOCKHOLDERS' EQUITY 2,420,255 2,603,784
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,055,609 $ 3,314,466
=========== ===========
</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>
Three Months Ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Revenue:
Rent income $ 1,650 $ 1,650
Interest income 26,077 18,548
Dividend income 12,409 -
Other - 1,139
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40,136 21,337
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Operating Expenses:
Depreciation 4,193 1,125
OfficerAEs compensation 1,854 -
Interest 5,117 1,054
Contract services 1,773 -
Auditing and accounting 11,794 -
Property expenses 3,260 -
DirectorsAE fees - 3,500
Other 6,583 4,162
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34,574 9,841
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Net income before provision
for income taxes 5,562 11,496
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Provision for income taxes 24,192 3,510
Less deferred taxes (23,133) -
------------ -----------
1,059 3,510
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Net income $ 4,503 $ 7,986
============ ============
Per Share $ nil $ .01
============ ============
Weighted Average Shares Outstanding 1,304,984 1,222,582
============ ============
</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
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows Operating Activities:
Net income $ 4,503 $ 7,986
Depreciation 4,193 1,125
(Decrease) in income taxes payable (75,808) (21,490)
Increase in deferred income tax asset (23,133) -
Increase in accounts payable and accrued
expenses 2,215 3,942
Stock issued for services - 3,500
Other (25,760) 1,304
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Net Cash Provided by Operating Activities (113,790) (3,633)
-------------- ------------
Cash Flows from Investing Activities:
(Investment) in equipment and furnishings (13,557) -
(Investment) in property (1,809) -
(Investment) in notes receivable (57,536) -
Collection of notes receivable 53,613 65,575
Collection of sale proceeds receivable - 246,500
Other - (3,755)
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Net Cash Provided by (Used in) Investing
Activities (19,289) 308,320
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Cash Flows from Financing Activities:
Common stock and paid-in capital - 4,638
(Repayment of) notes payable (4,398) (2,334)
-------------- ------------
Net Cash Provided by (Used in) Financing
Activities (4,398) 2,304
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Increase (decrease) in Cash (137,477) 306,991
Cash, Beginning of Period 414,390 445,158
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Cash, End of Period $ 276,913 $ 752,149
============ ===========
Interest Paid $ 5,117 $ 1,054
============ ===========
Income Taxes Paid $ 100,000 $ 25,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
(1) Condensed Financial Statements
------------------------------
The financial statements included herein have been prepared by Prime Rate
Income & Dividend Enterprises, Inc. (Company) 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, 2000 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.
(2) Business of the Company
-----------------------
The Company is principally in the consulting business, but also is 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. During the year ended June 30, 2000, the Company expanded its
business to include providing consulting services to companies interested in
becoming publicly traded. All intercompany account balances have been
eliminated in the consolidation.
6
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
(3) Stock Issued for Services
-------------------------
On March 31, 2000, the Company issued 28,000 shares of its common stock for
services valued at $2.50 per share. Such services included consulting
services, management advisory services, investment planning and accounting.
In addition, 1,160 shares were issued for services in January
2000 at $1.72 per share, for accounting services. None of the shares were
issued to officers and directors of the Company. The Company intends to
register the shares through an S-8 registration.
(4) Stock Options
-------------
On March 31, 2000, the Company granted options to acquire 400,000 shares to
its President, and 200,000 shares each to two non-officer stockholders of
the Company. The options are exercisable at any time through June 30, 2002
at $2.50 per share. The Company intends to register such options and
the underlying shares through an S-8 registration.
(5) Consulting Income
-----------------
During the year ended June 30, 2000, the Company earned $994,689 in consulting
fee income related to providing consulting services to companies interested
in being able to trade their stock publicly. The Company records consulting
fee income equal to the closing trading price on the date of receipt of
free trading securities and 90% of the trading price for restricted
securities.
(6) Marketable Equity Securities
----------------------------
In accordance with the Statement of Financial Accounting Standards number 115,
investments in securities may be classified in these categories:
a) Held-to-maturity are investments in debt securities in which the Company
has the positive intent and ability to hold the security to maturity. These
investments are reported at amortized cost.
b) Trading securities are securities which are bought and held principally
for the purpose of selling them in the near term. These securities are
valued at market with unrealized gains or losses recorded in operations.
c) Available for sale securities are securities not classified as
held-to-maturity or trading. These securities are valued at market with
unrealized gains or losses recorded in stockholder's equity.
7
<PAGE>
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
(6) Marketable Equity Securities, continued
---------------------------------------
At September 30, 2000, the Company had available for sale security investments
in the following companies:
Name Exchange
Pilgrim Prime Rate Trust (PPR) NY Stock Exchange
EmedSoft.com, Inc. (MED) AMEX
Odyssey Marine Exploration (OMEX) OTCBB
GoOnline Networks Corporation (GONT) OTCBB
MPEG Super Site, Inc. (MPSS) OTCBB
KellyAEs Coffee Group, Inc. (KLYS) OTCBB
Total Total
Total Market Value Unrealized
Recorded Cost September 30, 2000 Depreciation
------------- ------------------ ------------
$ 1,585,045 $ 780,164 $ (804,881)
Provision for Deferred Income Taxes 297,806
-----------
Unrealized depreciation, net of
deferred income taxes $ (507,075)
===========
(7) Management Agreement
--------------------
On March 31, 2000, the Company's Board of Directors agreed to enter into a
management agreement whereby the Company's President, through an entity
owned by him would be compensated for services in an amount equal to 25%
of the Company's net income before income taxes commencing April 1, 2000
on net income earned after March 31, 2000. This agreement may be
terminated at any time without notice by any officer of the Company.
8
<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
consulting business, but also is 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 Company has not encountered any
difficulty with the year 2000 effect on any of its activities, and does not
expect any in the future.
The following discussion of the financial condition and results of operations
of the Company relates to the three (3) months ended September 30, 2000 and
1999, and should be read in conjunction with the financial statements and
notes thereto included elsewhere in this Report.
Results of Operations
---------------------
Revenue for the three month period ended September 30, 2000 increased from the
three month period ended September 30, 1999 as follows:
1999 2000 Increase
-------- -------- --------
Three Months Ended
September 30, $ 21,337 $ 40,136 $ 18,799
Revenue increased principally due to interest and dividends received from
investments.
Operating expenses were $9,841 during the three month period ended September
30, 1999 as compared to $34,574 during the three month period ended September
30, 2000. Operating expenses increased principally due to auditing fees for
one of the Company's wholly owned subsidiaries, and interest, depreciation
and other costs related to its investment property.
Net income after provision for income taxes amounted to $4,503 during the
three month period ended September 30, 2000 as compared to $7,986 during
the three month period ended September 30, 1999, a decrease of $3,483.
9
<PAGE>
Liquidity and Capital Resources
-------------------------------
Working capital was $1,213,674 at September 30, 2000 as compared to $1,349,057
at June 30, 2000. The Company's stockholders' equity was $2,420,255 at
September 30, 2000 as compared to $2,603,784 at June 30, 2000. The decrease
in stockholders' equity related principally to the depreciation of marketable
equity securities and net income recognized for the three months ended
September 30, 2000. 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. Also the values and rental rates on the
Company's real estate could be affected by future inflation, in any.
10
<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
--------------------------------
None.
11
<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.
(Signature) /s/Michael L. Schumacher
(Date) November 14, 2000
(Name and Title Michael L. Schumacher, Chief Executive
Officer and Principal Accounting Officer
12
