BAP ACQUISITION CORP.
1051 FIFTH AVENUE NORTH,
NAPLES, FL 34102-5818
TEL: (941) 261-3396
FAX: (941) 261-5031
MARCH 23RD, 1998
Ms. Barbara Jacobs-Deputy Director
Mr. Ed. Loftus-Accountant
U.S Securities & Exchange Commission
Corporate & Finance Small Business Section,
Washington, DC
Please find form 10K-SB for Bap Acquisition Corp., for the Year ending
December 31, 1997. The financial statements included herein reflect no
changes from the preceding year in accounting principles or practices or
in the method of applying them.
Yours Truly,
Bap Acquisition Corp.
/s/ Garfield Ricketts
- ---------------------
Garfield Ricketts
BAP Acquisition Corp.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Recapitalization
Effective November 21, 1995, pursuant to the terms and conditions of
an Agreement and Plan of Reorganization by and between BAP Acquisition Corp.
(the Company) and Ricketts Enterprises International, Inc. (REI), REI became
a wholly owned subsidiary of the Company. The transaction was accounted for
as a recapitalization, resulting in the historical operations of REI being
treated as the historical operations of the Company. Prior to the
recapitalization, the Company had not engaged in any form of business activity
and as a result, had no operating history. Subsequent to the recapitalization,
the principal business activities of the Company were carried out through
its wholly-owned subsidiary, REI. All discussions below concerning the Company
prior to the recapitalization relate to and reflect the operations of REI
only.
Revenue Sources
The company generates revenue primarily from the rental of residential
property, representing approximately 65% of total revenues and real estate
management services, representing approximately 30% of total revenues. The
Company plans to increase revenues by acquiring existing and/or developing
new residential properties and commercial real estate.
Financial Condition and Liquidity
The Company's long-term debt to capital (long-term debt and
stockholders' equity) ratio at December 31, 1997 and 1996 was 51.9% and 49.9%,
respectively.
The Company's source of working capital is from rental operating activities
and capital contributions from stockholders. The Company has not borrowed any
moneys from financial institutions for working capital needs. All debt of the
Company is from first mortgages on the income producing properties acquired
as a result of the recapitalization of REI.
Net cash provided by operating activities for 1997 was $16,300 compared to
$17,788 and negative $22,116 in 1996 and 1995, respectively. The negative
cash flow for 1995 was primarily due to payment of current liabilities
accrued in 1994.
Management of the Company believes that there are no commitments,
uncertainties, or contingent liabilities that will have a materially adverse
effect on the consolidated financial position or results of operations of the
Company.
Capital Expenditures and Financing Requirements
Capital expenditures during 1997 totaled $4,204, which were for
purchases of office equipment and furniture, compared to $1,046 and $1,006 in
1996 and 1995, respectively, which were also for purchases of office equipment
and furniture. There were no real property acquisitions or investments
thereof.
The Company currently has an agreement represented by a Letter of
Intent dated January 15, 1996 to purchase 26 residential rental properties and
one commercial office property from Garfield Ricketts, a majority stockholder.
Total purchase price of the 27 properties per the agreement is $2,482,800,
based on the lower of cost or market value of the properties. Market value
was determined based on Multiple Listing Service's market analysis, which
tracks sales prices of comparable properties within the area. Terms of the
agreement require the Company to assume, refinance, or pay off the balance
due on the first mortgages on the properties in the amount of $1,322,102 as
of December 31, 1997, less any debt reduction since that date, and pay the
balance of the purchase price as of January 15, 1996 to Garfield Ricketts in
cash or other form of payment acceptable to him. All properties to be acquired
will be subject to a current appraisal; purchase price will be amended
accordingly for any material changes in value of the properties before
proceeding with the terms of the agreement.
The Company will require funds to acquire additional income producing
properties and/or real estate related entities and also to cover the legal
and accounting costs of meeting its reporting obligations under the
Securities Exchange Act. The Company will seek to borrow funds from financial
institutions or raise money through the offering of its common stock in order
to acquire the 27 properties represented by the agreement and Letter of Intent
described above. Management believes that the Company can continue to operate
and meet its obligations via working capital from operating and financing
activities. Management is of the opinion that inflation has not and will not
have a material effect on the operations of the Company.
Results of Operations
The following table sets forth for the periods indicated, the
percentages which selected items in the Company's Statements of Operations
bear to total revenues:
Year
Ended December 31
1997 1996 1995
Revenues: ------- ------- -------
Rental Income 69.5% 63.5% 46.6%
Management Services 30.2% 27.9% 50.1%
Commissions --- 8.0% 2.8%
Interest and Other .3% .6% .5%
------- ------- -------
Total Revenues 100.0% 100.0% 100.0%
Expenses:
Direct Expenses:
Depreciation and Amortization 21.5% 19.0% 29.1%
Interest 17.9% 17.1% 14.5%
Real Estate Taxes 11.1% 9.8% 3.0%
Repairs & Maintenance 11.5% 6.9% 11.4%
Utilities 5.9% 4.3% 2.3%
Insurance 7.2% 4.1% 1.0%
Other Direct Expenses 1.0% 4.0% 16.2%
-------- ------- -------
Total Direct Expenses 76.1% 65.2% 77.5%
General and Administrative Expenses:
Office Occupancy Expense 11.5% 11.6% 21.8%
Office Supplies & Expense 4.3% 5.0% 11.3%
Professional Fees 11.1% 2.2% 1.6%
Telephone 5.0% 4.1% 5.9%
Dues & Subscriptions 5.2% 3.9% 6.5%
Travel & Entertainment 1.2% 1.4% 2.1%
Other Administrative Expenses 3.9% 2.7% 2.6%
-------- ------ ------
Total General & Administrative Expenses 42.2% 30.9% 51.8%
-------- ------ ------
Total Expenses 118.3% 96.1% 129.3%
-------- ------ ------
Income (Loss) Before Taxes (18.3)% 3.9% (29.3)%
Provision for Income Taxes --- 1.4% ---
Net Income (Loss) (18.3)% 2.5% (29.3)%
Year Ended December 31, 1997 Compared With Year Ended December 31, 1996
Net Income (Loss)
The Company reported a net loss of $15,078 in 1997 compared to net
income of $2,314 in 1996. The reason for the loss in 1997 is twofold. First,
the Company no longer received commission revenues from an outside broker,
thereby reducing total revenues. Second, general and administrative expenses
increased due to the accounting costs of meeting reporting obligations under
the Securities Exchange Act.
Revenues
Total revenues for 1997 decreased by $10,711 (11.5%) to $82,122 from $92,833
for 1996. The decrease is due to the fact that the Company no longer receives
commission revenues from an outside real estate broker.
Direct Expenses
Direct expenses for 1997 increased by $1,994 (3.3%) to $62,542 (76.1% of total
revenues) from $60,548 (65.2% of total revenues) for 1996. The increase is due
primarily to interior maintenance of the rental properties performed during
1997.
General and Administrative Expenses
General and administrative expenses for 1997 increased by $5,994 (20.9%) to
$34,658 (42.2% of total revenues) from $28,664 (30.9% of total revenues) for
1996. The increase is due primarily to the accounting fees that the Company
incurred to meet its reporting obligations under the Securities Exchange Act.
Income Taxes
There was no provision for Federal Income Tax for 1997 because the Company
was operating at a loss. The provision for income taxes for 1996 is based on
an effective tax rate of 15%.
Year Ended December 31, 1996 Compared With Year Ended December 31, 1995
Net Income (Loss)
The Company reported net income of $2,314 in 1996 compared to a net
loss of $17,377 in 1995. The loss in 1995 is attributable to the fact that
after the recapitalization of REI in November 1995, the operating revenues
received from the acquired rental properties were not sufficient to cover both
the direct expenses of those rental properties and the general and
administrative expenses of the Company. Also, general and administrative
expenses were higher as a percentage of total revenues in 1995, because of the
recapitalization of REI, as shown in the above table. In 1996, the Company was
able to control costs and create positive net operating income.
Revenues
Total revenues for 1996 increased by $33,557 (56.6%) to $92,833 from $59,276
for 1995. The increase is the result of the recapitalization of REI and the
acquisition of income producing properties.
Direct Expenses
Direct expenses for 1996 increased by $14,600 to $60,548 (65.2% of total
revenues) from $45,948 (77.5% of total revenues) for 1995. The dollar amount
of direct expenses increased due to the acquisition of income producing
properties with the recapitalization of REI in November 1995. The direct
expenses decreased as a percentage of total revenues by 12.3% from 77.5% to
65.2% because the revenues from the acquired properties increased by a
greater percentage than their related expenses due to the timing of the
recapitalization and the related expenses incurred.
General and Administrative Expenses
General and administrative expenses for 1996 decreased by $2,033 (6.6%) to
$28,664 (30.9% of total revenues) from $30,697 (51.8% of total revenues) for
1995. This represents a decrease in general and administrative expenses as a
percentage of total revenues of 20.9% from 51.8% to 30.9%. This decrease is
attributed to the fact that the Company was able to control its general and
administrative costs and recognize some economy of scale since the acquisition
of income producing properties from the recapitalization of REI in November
1995.
Income Taxes
The provision for income taxes for 1996 is based on an effective tax rate of
15%. The provision for income taxes for 1995 represents Florida State Tax, as
an S-Corporation.
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
FINANCIAL REPORTS
AT
DECEMBER 31, 1997 AND 1996
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A DELAWARE CORPORTION)
NAPLES, FLORIDA
TABLE OF CONTENTS
Independent Auditor's Report 1
Consolidated Balance Sheets at December 31, 1997 and 1996 2
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995 3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 5
Notes to the Consolidated Financial Statements 6-11
<PAGE>
INDEPENDENT AUDITOR'S REPORTS
To the Board of Directors
and Stockholders
BAP Acquisition Corp.
and Subsidiary
(A Delaware Corporation)
Naples, Florida
We have audited the accompanying consolidated balance sheets of BAP
Acquisition Corp. and Subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of changes in stockholders' equity, operations
and cash flows for each of the three years in the period ended December 31,
1997. 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 consolidated financial
position of BAP Acquisition Corp. and Subsidiary as of December 31, 1997 and
1996 and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Rotenberg & Company LLP
/s/ William J. Friedman
Rochester, New York
February 27, 1998
<PAGE>
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
__________ __________
Assets
Revenue Producing Assets -
Net of Accumulated Depreciation $ 229,670 $ 238,004
Land Held for Investment 24,000 24,000
Cash and Cash Equivalents 13,486 11,187
Rents Receivable 1,546 1,380
Other Current Assets 1,422 512
Tenant Escrow Account 27,389 20,404
Property and Equipment -
Net of Accumulated Depreciation 6,862 3,628
Organization Costs - Net of
Accumulated Amortization 27,189 36,511
__________ __________
Total Assets $ 331,564 $ 335,626
__________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgages Payable $ 141,133 $ 145,398
Accounts Payable and Accrued Expenses 15,135 1,307
Tenant Escrow Liability 27,389 20,404
Due to Stockholder 17,023 22,555
__________ __________
Total Liabilities $ 200,680 $ 189,664
__________ __________
Stockholders' Equity
Common Stock: $.001 Par;
20,000,000 Shares Authorized,
4,655,310 Shares Issued and Outstanding 4,655 4,655
Additional Paid In Capital 336,381 336,381
Deficit (210,152) (195,074)
__________ __________
Total Stockholders' Equity $ 130,884 $ 145,962
__________ __________
Total Liabilities and
Stockholders' Equity $ 331,564 $ 335,626
__________ __________
<PAGE>
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Common
Stock Additional Total
$.001 Par Paid-In Stockholders'
Shares Value Capital Deficit Equity
_________ ________ ________ ________ ________
Balance-January 1, 1995 4,655,310 $ 4,655 $ 10,398 $(180,011) $(164,958)
Non-Cash Capital Contribution
of Stockholder --- --- 325,983 --- 325,983
Net Loss - 1995 --- --- --- (17,377) (17,377)
_________ _________ _________ ________ _________
Balance-December 31, 1995 4,655,310 $ 4,655 $ 336,381 $(197,388) $143,648
Net Income - 1996 --- --- --- 2,314 2,314
_________ _________ ________ ________ ________
Balance-December 31, 1996 4,655,310 $ 4,655 $ 336,381 $(195,074) $145,962
Net Loss - 1997 --- --- --- (15,078) (15,078)
_________ ________ _________ _________ _________
Balance-December 31, 1997 4,655,310 $ 4,655 $ 336,381 $(210,152) $130,884
_________ _________ _________ _________ _________
<PAGE>
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
_________ __________ __________
Revenues
Commissions $ --- $ 7,450 $ 1,650
Management Services 24,810 25,860 29,705
Rental Income 57,072 58,946 27,623
Interest and Other 240 577 298
_________ _________ __________
Total Revenues $ 82,122 $ 92,833 $ 59,276
_________ _________ __________
Direct Expenses
Advertising $ 126 $ 392 $ 450
Bad Debts --- --- 8,529
Commission and
Management Fees 693 3,351 675
Depreciation and Amortization 17,656 17,653 17,267
Insurance 5,890 3,795 610
Interest 14,727 15,885 8,600
Real Estate Taxes 9,156 9,063 1,795
Repairs and Maintenance 9,456 6,375 6,700
Utilities 4,838 4,034 1,322
_________ _________ _________
Total Direct Expenses $ 62,542 $ 60,548 $ 45,948
_________ _________ _________
General and Administrative Expenses
Contributions $ 260 $ 246 $ 150
Depreciation 970 509 428
Dues and Subscriptions 4,271 3,644 3,845
Licenses, Dues and Fees 1,938 1,747 972
Occupancy Expenses 9,455 10,743 12,951
Office Supplies and Expense 3,534 4,645 6,684
Professional Fees 9,137 1,989 950
Telephone 4,099 3,823 3,497
Travel and Entertainment 994 1,318 1,220
_________ _________ __________
Total General and
Administrative Expenses $ 34,658 $ 28,664 $ 30,697
_________ _________ __________
Income (Loss)
Before Provision for Taxes $(15,078) $ 3,621 $(17,369)
Provision for Taxes --- 1,307 8
_________ _________ _________
Net Income (Loss) $ (15,078) $ 2,314 $(17,377)
_________ _________ _________
<PAGE>
1997 1996 1995
__________ __________ __________
Income (Loss) per
Common Share: $ (.003) $ --- $ (.004)
__________ __________ __________
Weighted Average
Number of Common 4,655,310 4,655,310 4,655,310
Shares Outstanding __________ __________ __________
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
_________ __________ _________
Cash Flows from Operating Activities
Net Income (Loss) $(15,078) $ 2,314 $(17,377)
Adjustments to Reconcile
Net Income to Net Cash Flows
from Operating Activities:
Amortization 9,322 9,322 12,422
Depreciation 9,304 8,840 5,273
Bad Debts --- --- 8,529
Changes in Assets and Liabilities:
Rents Receivable (166) 3,016 (8,661)
Other Current Assets (910) (512) 1,104
Accounts Payable and Accrued Expenses 13,828 (5,192) (23,406)
_________ ___________ _________
Net Cash Flows from
Operating Activities $ 16,300 $ 17,788 $(22,116)
_________ __________ _________
Cash Flows from Investing Activities
Acquisition of Fixed Assets $ (4,204) $ (1,046) $ (1,006)
Change in Due to Stockholder (5,532) (1,686) 24,241
_________ __________ _________
Net Cash Flows from
Investing Activities $ (9,736) $ (2,732) $ 23,235
_________ __________ _________
Cash Flows from Financing Activities
Repayment of Mortgages $ (4,265) $ (3,869) $ (1,119)
_________ __________ _________
Net Cash Flows from
Financing Activities $ (4,265) $ (3,869) $ (1,119)
_________ _________ _________
Net Increase (Decrease)
in Cash and Cash Equivalents $ 2,299 $ 11,187 $ ---
Cash and Cash Equivalents -
Beginning of Year 11,187 --- ---
_________ _________ _________
Cash and Cash Equivalents -
End of Year $ 13,486 $ 11,187 $ ---
1997 1996 1995
_________ _________ _________
Supplementary Disclosures
Interest Paid $ 14,727 $ 15,885 $ 8,600
Income Taxes Paid 1,055 --- 18
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital Contribution of Stockholder
on June 30, 1995 (See Note H) $ 325,983
BAP ACQUISITION CORP.
AND SUBSIDIARY
(A DELAWARE CORPORATION)
Naples, Florida
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Summary of Transaction
The consolidated financial statements for all periods presented reflect
the Plan of Reorganization which was effected as of November 21, 1995,
pursuant to which Ricketts Enterprises International, Inc. became a
wholly-owned subsidiary of BAP Acquisition Corp. The business combination is
accounted for as a recapitalization.
All references to the "Corporation" herein include BAP Acquisition
Corp. and its wholly-owned subsidiary, Ricketts Enterprises International,
Inc., individually or collectively.
Note B - Nature of Operations and Summary of Significant Accounting
Policies
BAP Acquisition Corp.
The Corporation was formed on August 24, 1994 under the laws of the
state of Delaware. On November 21, 1995, the Corporation acquired 100% of the
issued and outstanding shares of common stock of Ricketts Enterprises
International, Inc., a Florida corporation (hereinafter "REI"). The
transaction was treated as a reverse acquisition of the Corporation by REI.
Prior to the reverse acquisition, the Corporation had not engaged in any form
of business activity and as a result had no operating history. The principal
business activity of the Corporation is currently carried on through its
wholly-owned subsidiary, REI.
Ricketts Enterprises International, Inc.
REI is a duly licensed real estate corporation in the state of
Florida and is presently active in the ownership, management, and sale of
residential real estate in the states of Florida, Texas, and New York. The
acquisition of REI by BAP Acquisition Corp. has been accounted for as a
recapitalization, resulting in the historical operations of REI being treated
as the historical operations of the Corporation. Accordingly, the accompanying
historical financial statements of REI have been restated to reflect the
financial position, results of operations, and cash flows for all years
presented as if the reorganization had occurred at the beginning of the
earliest period presented.
Segment Data, Geographic Information, and Significant Customers
The Corporation operates in one industry segment and receives rental
revenues from third party tenants located in Florida and Texas. Approximately
65% of revenues are from rental operations, 35% from commissions and
management fees, and less than 1% from interest and other income.
Method of Accounting
The Corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
Use of Estimates
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 revenues and expense during the
reporting period. Actual results can differ from those estimates.
Concentrations of Credit Risk
Financial instruments which potentially expose the Corporation to
significant concentrations of credit risk consist principally of bank deposits
and rents receivable. Cash is placed primarily in high quality short term
interest bearing financial instruments. The Corporation performs evaluations
of its clients' financial condition and timely collection procedures on rents
receivable.
Cash and Cash Equivalents
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities of
three months or less. The company maintains cash and cash equivalents at
financial institutions which periodically may exceed federally insured
amounts.
Rents Receivable
The Corporation performs evaluations of its clients' financial
conditions and collectibility of rents receivable. No allowance for
uncollectible accounts has been provided, as management believes that all
accounts are collectible.
Revenue Producing Assets and Depreciation
Revenue Producing Assets consist of land and buildings which are
stated at cost, less the buildings' accumulated depreciation computed on the
straight line method over the estimated useful lives of 28 years.
Renewals and improvements are charged to property accounts. Costs
of maintenance and repairs that do not improve or extend asset lives are
charged to expense. The cost of property retired or otherwise disposed of and
the related accumulated depreciation are removed from the accounts.
The Revenue Producing Assets are considered long-lived assets and are
reviewed for impairment whenever events or changes in circumstances indicate
that the related carrying amount may not be recoverable. In performing the
review for recoverability, the Corporation estimates the future cash flows
expected to result from the use of the assets and their eventual disposition
in determining their fair value. When required, impairment losses on assets
to be held and used are recognized based on the difference between the fair
value and the carrying amount of the assets. Long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value less cost to
sell.
Property, Equipment and Depreciation
Property and equipment are stated at cost, less accumulated
depreciation computed using the straight line method over the estimated
useful lives as follows:
Office Equipment 5 - 10 Years
Office Furniture 7 - 15 Years
Maintenance and repairs are charged to expense. The cost of the
assets retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts.
Organization Costs and Amortization
Organization costs have been capitalized and are being amortized
over a life of five years.
Revenue Recognition
Revenues from commissions and management services are recognized as
services are rendered. Revenues from rental properties are recognized monthly
based on agreed upon payments in month-to-month or one year term lease
agreements.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
Note C - Land Held for Investment
The Corporation owns three building lots zoned for duplexes on which
it plans to build rental properties as soon as construction and permanent
financing can be arranged. The land is recorded at cost on the balance sheet
of $24,000.
Note D - Revenue Producing Assets
Revenue Producing Assets consisted of the following at December 31,
1997 and 1996:
1997 1996
__________ _________
Land $ 33,670 $ 33,670
Apartment Buildings 233,315 233,315
__________ __________
$ 266,985 $ 266,985
Less: Accumulated Depreciation 37,315 28,981
__________ __________
Net Revenue Producing Assets $ 229,670 $ 238,004
__________ __________
Depreciation expense for the years ended December 31, 1997, 1996,
and 1995 was $8,334, $8,331, and $4,845, respectively.
Note E - Property and Equipment
Property and equipment are recorded at cost and consisted of the
following at December 31, 1997 and 1996:
1997 1996
__________ __________
Office Equipment $ 8,059 $ 5,827
Office Furniture 7,643 5,671
__________ __________
$ 15,702 $ 11,498
Less: Accumulated Depreciation 8,840 7,870
__________ __________
Net Property and Equipment $ 6,862 $ 3,628
__________ __________
Depreciation expense for the years ended December 31, 1997, 1996,
and 1995 was $970 $509, and $428, respectively.
Note F - Organization Costs
Organization costs are being amortized over 5 years and consisted
of the following at December 31, 1997 and 1996:
1997 1996
__________ __________
Legal Fees $ 40,000 $ 40,000
Property Transfer Fees 6,702 6,702
_________ __________
$ 46,702 $ 46,702
Less: Accumulated Amortization 19,513 10,191
_________ __________
Net Organization Costs $ 27,189 $ 36,511
_________ __________
Amortization expense for the years ended December 31, 1997, 1996,
and 1995 was $9,322 $9,322 and $12,422, respectively.
Note G - Mortgages Payable
Mortgages payable consisted of the following at December 31, 1997
and 1996:
1997 1996
__________ ___________
1st Nationwide Mortgage
First mortgage due December, 2020, payable
in monthly payments of $307 including
principal and interest at 10.00%. $ 25,134 $ 26,247
Lloyd G. Sheehan
First mortgage due December, 2025, payable
in monthly payments of $353 including
principal and interest at 10.00%. 37,817 38,248
Lloyd G. Sheehan
First mortgage due December, 2020, payable
in monthly payments of $241 including
principal and interest at 8.75%. 19,976 21,066
Fleet Mortgage Group
First mortgage due December, 2020, payable
in monthly payments of $256 including
principal and interest at 9.50%. 21,285 22,279
Chase Manhattan Mortgage Corporation
First mortgage due December, 2020, payable
in monthly payments of $426 including
principal and interest at 12.00%. 36,921 37,558
__________ __________
Total Mortgages Payable $ 141,133 $ 145,398
__________ __________
Aggregate annual maturities of mortgages as of December 31, 1997
are as follows:
1998 $ 4,705
1999 5,191
2000 5,729
2001 6,322
2002 6,978
2003 and Thereafter 112,208
__________
Total $ 141,133
__________
Interest expense for the years ended December 31, 1997, 1996, and
1995 was $14,727, $15,885, and $8,600, respectively.
Note H - Related Party Transactions
The Corporation rents the office building for its corporate
headquarters located in Naples, Florida for $575 per month, based on a
month-to-month agreement from Garfield Ricketts, a 60% stockholder. Rent
expense in the amount of $6,900 for each of the years ended December 31, 1997,
1996 and 1995 is included in occupancy expenses.
The Corporation provides real estate management services for
Garfield Ricketts, a 60% stockholder, which include the collection of rents
for his personal rental properties and the disbursement of related expenses.
The Corporation receives 10% of the gross rents collected for this service,
which amounted to $19,940 in 1997. Due to Stockholder represents the net
amount collected on behalf of Garfield Ricketts.
The land held for investment and revenue producing assets owned by
the Corporation to date resulted from the transfer of the properties to REI
in June, 1995, which were previously owned by Garfield Ricketts, the
President of the Corporation and REI. REI managed the properties prior to the
transfer and acquired the portfolio at the carrying value from Garfield
Ricketts, based on the assumption of the existing outstanding mortgages of the
properties. The transaction resulted in a non-cash capital contribution from
Garfield Ricketts as shown below.
The following transactions occurred during 1994 and 1995 to effect
the reverse acquisition of the company by REI and resulted in non-cash
capital contributions from Garfield Ricketts, a 60% stockholder:
Common Additional
Stock Paid-In-Capital
__________ __________
Transfer of ownership of Land Held for Investment
and Revenue Producing Assets at cost less accumulated
depreciation to Ricketts Enterprises International, Inc. $ --- $ 275,180
Transfer of respective mortgages on Revenue Producing
Assets to Ricketts Enterprises International, Inc. --- (148,148)
Cash paid by Garfield Ricketts for Organization Costs --- 46,702
Converted loan payable to Garfield Ricketts to Common
Stock and Additional Paid-in-Capital 3,500 152,249
__________ _________
Total Non-Cash Contributions $ 3,500 $ 325,983
__________ _________
Note I - Income Taxes
The Corporation provides for income taxes based on income reported
in the financial statements. Deferred taxes are recognized on the differences
between financial statement income and taxable income which are attributable
to depreciation and entertainment expenses. The Corporation has $15,078 of
net operating loss carryforwards for federal tax purposes as of December 31,
1997, which are available to offset future taxable income through the year
2012.
Note J - Other Matters
REI has an agreement represented by a Letter of Intent dated
January 15, 1996 to acquire and operate an additional 26 residential rental
properties and one commercial office property held by the former REI
shareholders. The properties are valued at approximately $2.5 million, based
on Multiple Listing Service's market analysis which tracks sales prices of
comparable properties within the area. The acquisition will be completed when
permanent financing can be arranged. Financial data of the properties
consisted of the following for the years ended December 31, 1997, 1996 and
1995:
1997 1996 1995
__________ ___________ __________
Rental Income $ 273,375 $ 266,932 $ 253,097
Comparable Expenses 117,288 118,478 113,583
__________ __________ __________
Subtotal $ 156,087 148,454 139,514
Non-Comparable Expenses 161,022 169,565 165,825
__________ __________ __________
Net Loss $ (4,935) $ (21,111) $ (26,311)
__________ __________ __________
Non-comparable expenses include mortgage interest, depreciation,
corporate expenses, and income taxes. Future estimated taxable operating
results of the properties would approximate the results as shown above if the
Corporation assumes the existing outstanding mortgages. Results could differ
based on the financing structure used to acquire the properties. The
Corporation is not aware of any material factors relating to the 27 properties
that could cause the above financial information not to be indicative of
future operating results. The Corporation does not intend to pay cash
distribution from any positive cash flow that may be generated from the
properties.
ITEM 4: CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
From the inception of the Company through the acquisition of REI and to
December 31, 1997 its accountants were Rotenberg & Company, LLP of Rochester
New York. At no time have there been any disagreements with prior or current
accountants, regarding any matter of accounting principles or practices,
financial disclosures, or auditing scope or procedure.
PART 111
ITEM 1: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Directors and Executive Officers of the Company and their ages are
as follows.
NAME AGE POSITION
------ ---- --------
Garfield H. Ricketts 68 President/CEO/Director
Karen Ricketts 37 Vice President/Director
Una M. Ricketts 65 Secretary/Treasurer/Director
All Company Directors were elected upon the closing of the acquisition of
REI on November 21, 1995, and were re-elected unanimously by a majority
of the shareholders represented in person and by proxy in the Company's
annual meeting held at the Company's Principal place of business on
December 30, 1997, at 10:46 AM, and will remain in office until the next
annual meeting of the stockholders, and until their successors have been
duly elected and qualified. There are no agreements with respect to the
election of Directors. The Company has not compensated its Directors for
service on the Board of Directors and/or any committee thereof or
reimbursed for expenses incurred for attendance at meetings of the Board
of Directors. Officers are appointed annually by the Board of Directors
and each executive officer serves at the discretion of the Board of Directors
Directors: The Company does not have any standing committees.
None of the Officers and/or Directors of the Company are Officers or
Directors of any other publicly traded corporation, nor have any of the
Officers, Directors, Affiliates or Promoters of the Company filed any
bankruptcy petition, been convicted of or have been the subject of any
criminal proceedings, or the subject of any order, judgment, or decree
involving the violation of any state or federal securities laws within
the past five years.
<PAGE>
At present all the Officers and Directors of the Company serve without
compensation in their capacity as Officers and/or Directors.
All authorized out of pocket expenses incurred by an Officer or Director
on behalf of the Company is subject to reimbursement upon receipt by the
Company of the required documentation substantiating such expense.
There are no current plans nor at present does the Company have any current
or future obligation to compensate its Officers and Directors.
Compensation of Officers and Directors of the Company is at the discretion
of the Board of Directors and the current circumstances may change in the
future where the Officers and Directors of the Comapny receive compensation.
The business experience of each of the persons listed above during the
past five years is is follows:
Garfield H. Ricketts was Educated in Jamaica, West Indies at Excelsior
College, and Kingston Technical School, and studied further at the
Thomas Edison State College of New Jersey. He has been President, Chief
Executive Officer and a Director of REI since February 1993 at which time
he founded REI. He is Licensed by the Federal Cummunications Commission as a
Broadcast Engineer since March 1958 and was employed in Radio Broadcasting
From 1958 to 1966.
He joined the National Broadcasting Co.Inc.(NBC),in March 1966 as an
engineer and was promoted to Field Technical Supervisor, in 1976, a
Managerial Position, then to Manager of Electronic Journalism in 1979.
Later he was promoted to Manager of Field Operations and to many other
positions until retirement in January, 1989. Mr. Ricketts began building
and managing a portfolio of Real Estate property in 1983 prior to his
retirement.
He has been Licensed as a Real Estate Broker in the State of New York
since 1989, and became licensed in the State Of Florida in 1997.
Although he currently lives in Florida, continues to maintain license in
New York.
Una M. Ricketts was Educated in Jamaica West Indies in all phases of
Business (Accounting) and has been employed as bookkeeper for the past 43
years rising to the position of Chief Accountant with Merchant's Importing
Company of New York. Mrs Ricketts retired in July of 1993. She has been
the Chief Accountant for Ricketts Enterprises International Inc., since
its inception in February 1993.
Karen Ricketts obtained her Bachelor of Arts Degree in Communications
from the State University of New York, Buffalo in 1982. In 1989 she
completed an Associate Degree from Adelphi University and is a certified
Paralegal. After graduation in 1989 as a Paralegal, Ms. Ricketts joined
the law firm of Levey Phillips & Koningsberg, New York, New York, as a
Legal Assistant where she continues in the same capacity today.
ITEM 2 EXECUTIVE COMPENSATION
At present the Company does not maintain any form of bonus, profit sharing,
or deferred compensation plan for the benefit of any Officers or
Directors. The Board of Directors is currently considering a package of
benefits and will present a plan at the Company's next annual meeting.
There are no employment contracts with any individual working for or
associated with the Company or its subsidiary.
<PAGE>
Until the acquisition of REI the Company paid no compensation to its
Officers and Directors. REI was previously organized as a Sub-Chapter "S"
Corporation and the net income of REI was distributed to its Stockholders on
an annual basis.
Name and Annual Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
------------------ ---- ------ ----- ------------ ------------
Garfield Ricketts 1993 $2,693.00 0 0 0
President & CEO 1994 $2,355.50 0 0 0
1995 0 0 0 0
1996 0 0 0 0
1997 0 0 0 0
Una Ricketts 1993 $2,693.00 0 0 0
Secretary/Treasurer 1994 $2,355.50 0 0 0
1995 0 0 0 0
1996 0 0 0 0
1997 0 0 0 0
Karen Ricketts 1995 0 0 0 0
V.P/Director 1996 0 0 0 0
1997 0 0 0 0
The Officers and Directors of the Company, after the acquisition of REI,
have not received any form of cash or other compensation. Mr. Dan McCaslin
who served as the Real estate broker of record from February 1993 to March
of 1996, did receive commissions on the sale or purchase of real estate
properties in his capacity as the designated Corporate Real Estate Broker
for REI only, however, Mr McCaslin has resigned and no longer has any
affiliation with the Company.
In the future the Company may establish with each Company Officer and/or
Director some form of compensation. Said compensation may include a
situation wherein an Officer and/or Director could receive shares of the
Company's Common Stock in lieu of cash until such time that the Company
can sustain such expenses on a cash basis. In the event shares of the
Company's Common Stock are delivered to an Officer and/or Director as
compensation, the value of the shares delivered will be based on one or
more of the following criteria: the then current market value of the
shares as traded on a public exchange, the then current Book Value of the
shares, or as determined by the Company's Board of Directors.
The dollar amount of compensation due each Officer and/or Director and a
formulae for valuing the shares of the Company's Common Stock in order to
determine the number of shares to be issued as compensation will be
determined by the Board of Directors prior to the issuance of any shares
of the Company's Common Stock. No dollar amount of Officer/Director
compensation or formulae for determining the value of the shares of the
Company's Commons Stock has been determined at this time and the Board of
Directors has no plans to make such a determination in the near future.
<PAGE>
ITEM 3 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, information with respect to (1) any
person, management or otherwise, known by the Company to own beneficially more
than five percent (5%) of the Company's stock. (2) the shares of Common
stock beneficially owned by each Officer and Director of the Company, and (3)
the total of the Company's Common Stock beneficially owned by Company's
Officers and Directors as a group. Each stockholder holds the sole voting and
investment power with regard to the shares owned beneficially by such
stockholder.
Name and Address of Amount and Nature of Percent of
Beneficial owner Beneficial Ownership Class (1)
- -------------------- -------------------- ----------
Garfield H Ricketts 2,800,000 (2) 60%
4010 Royal Wood Blvd.
Naples, FL 34112
Una M. Ricketts 700,000 (2) 15%
4010 Royal Wood Blvd.
Naples, FL 34112
Karen Ricketts 0 (3) 0
13 Terrace Circle,
Great Neck NY 11021
All Directors and Executive
Officers as a group (3 Persons) 3,500,000 75%
Notes: Unless otherwise indicated in the footnotes below, the Company
has been advised that each person above has sole voting power over the
shares indicated.
Note 1: Based upon the 4,655,310 shares of Common Stock being issued and
outstanding on December 31, 1997, there are no outstanding options for the
purchase of shares of the Company's Stock.
Note 2: Garfield Ricketts and Una M Ricketts are related by marriage since
February 1952. Neither claims a beneficial interest in the other's shares of
Common Stock.
Note 3: Karen Ricketts is the daughter of Garfield and Una Ricketts.
<PAGE>
ITEM 4 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the Company's last two fiscal years, there have been no arrangements
between the Company and any of its current or previous Officers, Directors.
or nominees for election as a Director, or any shareholder owning greater
than five percent (5%) of the Company's outstanding shares, nor any member
of the above referenced individuals'immediate family except as set forth
herein.
The Company acquired 100 % of the issued and outstanding Shares of
Ricketts Enterprises International, Inc. on November 21, 1995 from Garfield
and Una Ricketts, husband and wife, in exchange for 3,500,000 shares of
Common Stock of the Company. Prior to the acquisition of REI by the Company
Garfield and Una Ricketts, husband and wife, sold to REI a portfolio of
Real Estate involving ten real estate properties (see item 1, Business
Description for details). The carrying value of the properties was considered
to be $275,180. As part of the transaction REI assumed first mortgages on the
properties in the amount of $148,148. Mr. & Mrs. Ricketts contributed their
equity of $127,032 to stockholder equity of REI. In addition Mr. & Mrs
Ricketts paid transaction cost associated with the transfer of the
properties and the acquisition of REI by the Company in the amount of
$46,702. In addition Mr. Ricketts converted a loan due him in the amount of
$152,249 to common stock and additional paid in capital.
The acquisition of additional income producing commercial and residential
real estate properties may occur as a result of a January 15, 1996 Letter
of Intent the Company entered into with Mr. Garfield Ricketts, President
of the Company. The terms of said Letter of Intent call for the Company
to assume, refinance or payoff $1,322,102 as of December 31, 1997, less any
further debt reduction, in existing debt in the form of first mortgages on
the existing 27 properties being acquired for a total cost of $2,482,800.
The balance is due Mr. Ricketts in the form of cash, a note, or at his option
additional shares of restricted Common Stock in the Company.
The purchase price of $2,492,800 was determined by the lower of the cost or
current market value of each property based on General Market Analysis as
determined from information provided by the Multiple Listing Services of
Naples, Florida, and Houston, Texas.
Before the Company proceeds under the Letter of Intent each property
will be the subject of a current appraisal, by a licensed Real Estate
Appraiser, to determine the value of each of the subject properties at
the time that the Letter of Intent is exercised, and if any material
changes have occurred the Company will negotiate a more favorable
purchase price. The Company is currently contemplating undertaking a
new offering of its debt and/or equity in order to achieve its business
objectives over the next 12 months. Unless the Company is able to raise
additional capital from borrowing (refinance of the existing properties
being acquired) or the sale of corporate debt and/or equity securities
for which there is no assurance the Company, will accomplish its business
objectives.
The Company and its subsidiary REI currently occupy office facilities of
approximately 1000 square feet (an office Condominium) that is owned by
Mr. Garfield Ricketts, President of the Company. The Company pays $575
monthy plus all costs of mainting the facility. There is no written lease
agreement between the Company or its subsidiary, REI and Mr. Ricketts. The
Company is considered to be a month to month tenant.
The Company currently does not have in force or effect any policies,
procedures or control with respect to entering into future transactions
with its Officers, Directors, Affiliates or a Related Party.
<PAGE>
PART IV
ITEM 1
EXKIBITS AND REPORTS ON FORM 8-k
None
SIGNATURES
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, thereunder duly authorized.
Dated March 27, 1998
BAP ACQUISITION CORP.
BY /S/ Garfield Ricketts by /s/ Una M. Ricketts
- ------------------------- -----------------------------
Garfield Ricketts-President Una M. Ricketts-Secretary/Treasurer
