U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-2864
DIVERSIFIED REALTY, INC.
(Exact name of small business issuer as specified in its charter)
Montana 81-0268110
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at June 30, 1998
$.10 Par Value Common Stock 5,372,895 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
<PAGE>
DIVERSIFIED REALTY, INC.
INDEX
JUNE 30, 1998
Page Number
PART I
Condensed Financial Statements:
Balance Sheet
June 30, 1998 2
Statements of Income -
Six Months and Three Months Ended June 30, 1998 and 1997 3
Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 4
Notes to Financial Statements 5
Management's Discussion and Analysis
of the Statements of Income 6
PART II
Other Information 7
Signatures 8
1
<PAGE>
DIVERSIFIED REALTY, INC.
BALANCE SHEET
AS OF JUNE 30, 1998
ASSETS
Current Assets
Cash $ 1,869,697
Receivables - Net 182
Due From Parent Company 226,600
Total Current Assets 2,096,479
Property, Plant and Equipment, Net 254,882
TOTAL ASSETS $ 2,351,361
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 30,345
Total Current Liabilities 30,345
Stockholders' Equity
Common Stock - $.10 Par Value,
11,000,000 shares authorized,
5,875,000 shares issued 537,500
Accumulated Deficit (145,261)
Cost of Common Stock in Treasury (631)
Total Stockholders' Equity 2,321,016
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,351,361
See Notes to Financial Statements
2
<PAGE>
DIVERSIFIED REALTY, INC.
STATEMENTS OF INCOME
For The Three Months For the Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Operating Revenues $ 41,737 $ 31,045 $ 82,205 $ 64,564
Operating Expenses 19,080 18,877 34,423 33,305
22,657 12,168 47,782 31,259
Income Tax Expense (9,700) (2,800) (20,000) (7,000)
Net Income $ 12,957 $ 9,368 $ 27,782 $ 24,259
See Notes to Financial Statements
3
<PAGE>
DIVERSIFIED REALTY, INC.
STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By Operating
Activities $ 35,838 $ 41,487
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Principal of
Notes Receivable 11,466 906
Net Cash Provided By
Investing Activities 11,466 906
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash Advances
From (To) Parent Company (242,800) 1,200
Net Cash Provided (Used) By Financing
Activities (242,800) 1,200
NET INCREASE (DECREASE) IN CASH (195,496) 43,593
CASH - BEGINNING OF PERIOD 2,065,193 947,913
CASH - END OF PERIOD $1,869,697 $ 991,506
See Notes to Financial Statements
4
<PAGE>
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
In the opinion of management, all adjustments necessary (consisting of only
normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of June 30, 1998 and
the results of the Company's operations for the six months and three months
ended June 30, 1998 and 1997 and cash flows for the six months ended
June 30, 1998 and 1997.
The results of operations for the six months and three months ended
June 30, 1998 and 1997 are not necessarily indicative of the results to be
expected for the full year.
Parent -
M Corp, Great Falls, Montana owns approximately 94% of the outstanding shares
of the Company.
5
<PAGE>
DIVERSIFIED REALTY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
June 30, 1998
A summary of the period to period changes in items included in the statements
of income is shown below.
COMPARISON OF
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 AND 1997 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C>
Revenues $ 10,692 34.4% $ 17,641 27.3%
Expenses 203 1.1% 1,118 3.4%
Net Income 3,589 38.3% 3,523 14.5%
</TABLE>
Revenues increased $17,641 (27.3%) in the first six months of 1998 as
compared with the first six months of 1997 due primarily to an increase in
interest revenues ($20,571, 84.4%) partially offset by a decrease in other
revenues ($4,852, 97.1%). Interest revenues increased primarily due to an
increase in interest-earning deposits maintained by the Company. Operating
expenses increased $1,118 (3.4%) in the first six months of 1998 as compared
with the first six months of 1997 with an increase in other operating
expenses ($1,251) partially offset by a decrease in the provision for
depreciation. The increase in other operating expenses during the first six
months of 1998 as compared with the first six months of 1997 was due
primarily to increases in maintenance expenses. The provision for income tax
expense increased $13,000, 185.7%, in the first six months of 1998 as
compared with the first six months of 1997 due to increases in pretax
income and income tax rates.
6
<PAGE>
DIVERSIFIED REALTY, INC.
PART II
OTHER INFORMATION
JUNE 30, 1998
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
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
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DIVERSIFIED REALTY, INC.
Registrant
Date: August 7, 1998 s/K. King
K. King
Assistant
Secretary-Treasurer
Date: August 7, 1998 s/Jerry K. Mohland
Jerry K. Mohland
Accountant
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements contained in the Company's Form 10-QSB and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,869,697
<SECURITIES> 0
<RECEIVABLES> 226,782
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,096,479
<PP&E> 254,882
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,351,361
<CURRENT-LIABILITIES> 30,345
<BONDS> 0
<COMMON> 537,500
0
0
<OTHER-SE> 1,783,516
<TOTAL-LIABILITY-AND-EQUITY> 2,351,361
<SALES> 0
<TOTAL-REVENUES> 82,205
<CGS> 0
<TOTAL-COSTS> 34,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 47,782
<INCOME-TAX> 20,000
<INCOME-CONTINUING> 27,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,782
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
