UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
QUARTERLY REPORT PUSRUANT TO SECTION 13 OR 15 (d) THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ending September 30,1999 Commission File Number 21-16563-B
REII INCORPORATED
(Formerly Bap Acquisition Corp.)
-----------------------------------------------------
( Exact Name of Registrant as Specified in its Charter)
DELAWARE 51-0373876
----------------------------- ---------------------
(State or other Jurisdiction of (IRS Employee Number)
(Incorporation Or Organization)
1051 FIFTH AVENUE NORTH, NAPLES, FLORIDA 34102
------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
(941) 261-3396
------------------------------
(Regiatrant's Telephone Number
Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceeding 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_____
As of September 30, 1999 4,655,310 shares of common stock, $.001 par were
outstanding.
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION.
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
FINANCIAL REPORTS
AT
SEPTEMBER 30, 1999 AND 1998
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
TABLE OF CONTENTS
<S> <C>
Consolidated Balance Sheets at September 30, 1999 (Unaudited)
and December 31, 1998 2
Consolidated Statements of Operations for the Three Months Ended
September 30, 1999 and 1998 (Unaudited) and for the Nine Months
Ended September 30, 1999 and 1998(unaudited) 3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited) 5
Notes to the Consolidated Financial Statements (Unaudited) 6
PART 11
Item 1 Legal Proceedings 11
Item 2 Change In Securities 11
Item 3 Defaults upon Senior Securities 11
Item 4 Submission of Matters to a vote of Security Holders 11
Item 5 Other Matters 12
Item 6 Exhibits and reports on form 8-k 12
Item 7 Signatures 12
<PAGE>
REII INCORPORATED
(FORMERLY BAP ACQUISITON CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS AT
SEPTEMBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
<CAPTION>
ASSETS
September 30, December 31,
1999 1998
_____________ ___________
<S> <C> <C>
Assets
Revenue Producing Assets -
Net of Accumulated Depreciation $ 755,754 $ 772,933
Land Held for Investment 24,000 24,000
Cash and Cash Equivalents 21,541 4,993
Other Current Assets 2,520 5,353
Tenant Escrow Account 42,307 32,033
Office Property and Equipment -
Net of Accumulated Depreciation 7,905 7,715
Organization Costs -
Net of Accumulated Amortization 4,467 17,867
_________ _________
Total Assets $ 858,494 $ 864,894
_________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgages Payable - Bank $ 526,986 $ 495,528
Mortgages Payable - Stockholder 183,682 184,900
Accounts Payable and Accrued Expenses 1,898 5,712
Tenant Escrow Liability 42,307 32,033
Due to Stockholder 25,036 31,749
_________ _________
Total Liabilities $ 779,909 $ 749,922
_________ _________
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 (262,451) (226,064)
_________ _________
Total Stockholders' Equity $ 78,585 $ 114,972
_________ _________
Total Liabilities and Stockholders' Equity $ 858,494 $ 864,894
_________ __________
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<PAGE>
</TABLE>
<TABLE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (UNAUDITED)
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1999 1998 1999 1998
________ ________ _________ ________
<S> <C> <C> <C> <C>
Revenues
Management Services $ 5,913 $ 5,763 $ 18,698 $ 17,315
Rental Income 28,461 12,129 87,806 39,106
Commissions 806 7,590 5,006 7,590
Interest and Other --- 55 135 127
________ ________ _________ ________
Total Revenues $ 35,180 $ 25,537 $ 111,645 $ 64,138
_________ ________ _________ ________
Direct Expenses
Advertising $ 790 $ 75 $ 1,033 $ 1,167
Commissions and Management Fees 1,052 309 2,949 886
Depreciation 1,969 2,357 19,821 6,551
Insurance 2,421 1,431 7,265 3,750
Interest 12,741 3,594 33,575 10,832
Real Estate Taxes 4,815 2,296 14,445 6,899
Repairs and Maintenance 3,795 2,538 12,323 10,271
Utilities 863 1,457 2,700 3,036
________ ________ _________ ________
Total Direct Expenses $ 28,446 $ 14,057 $ 94,111 $ 43,392
________ ________ _________ ________
General and Administrative Expenses
Contributions $ 110 $ 50 $ 230 $ 225
Depreciation and Amortization 5,010 2,725 14,853 8,175
Licenses, Dues and Fees 330 (605) 12,034 1,505
Office Occupancy Expenses 2,434 2,190 7,489 7,048
Office Expense 2,998 2,851 8,263 8,304
Professional Fees 1,625 99 11,052 989
________ ________ _________ ________
Total General and
Administrative Expenses $ 12,507 $ 7,310 $ 53,921 $ 26,246
________ ________ _________ ________
Total Expenses $ 40,953 $ 21,367 $ 148,032 $ 69,638
________ ________ _________ ________
Income (Loss) Before Benefit/
(Provision) for Taxes $ (5,773) $ 4,170 $ (36,387) $ (5,500)
Provision for Taxes --- --- --- ---
________ ________ _________ ________
Net Income (Loss) for the Period $ (5,773) $ 4,170 $ (36,387) $ (5,500)
________ ________ _________ ________
-3-
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</TABLE>
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1999 1998 1999 1998
_________ _________ _________ _________
<S> <C> <C> <C> <C>
Loss per Common Share: $ (.001) $ .001 $ (.008) $ (.001)
_________ _________ _________ _________
Weighted Average Number of Common
Shares Outstanding 4,655,310 4,655,310 4,655,310 4,655,310
_________ _________ _________ _________
-4-
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</TABLE>
<TABLE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<CAPTION>
1999 1998
________ ________
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $(36,387) $ (5,500)
Adjustments to Reconcile
Net Loss to Net Cash Flows
from Operating Activities:
Amortization 13,400 6,992
Depreciation 21,274 7,734
Changes in Assets and Liabilities:
Rents Receivable --- (209)
Other Current Assets 2,833 (1,698)
Accounts Payable and Accrued Expenses (3,814) (6,811)
________ ________
Net Cash Flows from Operating Activities $ (2,694) $ 508
________ ________
Cash Flows from Investing Activities
Acquisition of Office Furniture and Equipment $(1,643) $ (2,431)
Improvements to Income Producing Properties (2,642) (7,084)
________ ________
Net Cash Flows from Investing Activities $ (4,285) $ (9,515)
________ ________
Cash Flows from Financing Activities
Mortgage Refinancing $ 37,312 $ ---
Repayment of Mortgages (7,072) (3,486)
Change in Due to Stockholder (6,713) 11,944
________ ________
Net Cash Flows from Financing Activities $ 23,527 $ 8,458
________ ________
Net Increase (Decrease) in Cash
and Cash Equivalents $ 16,548 $ (549)
Cash and Cash Equivalents -
Beginning of Period 4,993 13,486
________ ________
Cash and Cash Equivalents -
End of Period $ 21,541 $ 12,937
________ ________
Supplementary Disclosures
Interest Paid $ 33,575 $ 10,832
Income Taxes Paid --- ---
-5-
<PAGE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORATION)
Naples, Florida
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The condensed consolidated financial statements of REII
Incorporated (formerly BAP Acquisition Corp.) and Subsidiary (the
"Corporation") included herein have been prepared by the Corporation,
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in
conjunction with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Corporation believes that the disclosures are adequate so that the
information presented is not misleading. These condensed financial
statements should be read in conjunction with the annual audited
financial statements and the notes thereto included in the Corporation's
Form 10KSB.
The accompanying unaudited interim financial statements
reflect all adjustments of a normal and recurring nature which are, in
the opinion of management, necessary to present fairly the financial
position, results of operations and cash flows of the Corporation for
the interim periods presented. The results of operations for these
periods are not necessarily comparable to, or indicative of, results of
any other interim period or for the fiscal year as a whole. Factors
that affect the comparability of financial data from year to year and
for comparable interim periods include the acquisition of additional
income producing properties, mortgage refinancing, and increased general
and administrative costs required to meet SEC reporting obligations.
Certain financial information that is not required for interim financial
reporting purposes has been omitted.
Note B - Principles of Consolidation
The consolidated financial statements include the accounts of
the Corporation and its subsidiary, Ricketts Enterprises International,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
Note C - Year 2000
REII recently upgraded its computer system to be year 2000
compliant. The Corporation has not been informed of any material risks
associated with its vendors regarding year 2000 compliance, however,
there is no guarantee that such risks do not exist and will not have an
adverse effect on operations. Management is continuing to assess any
impact that the transition to the year 2000 will have on operations.
Due to the nature of the Corporation's business, it is not anticipated
that any impact would be material, however the cost of a potential
impact is not determinable.
-6-
<PAGE>
Note D - Other Matters
Effective April 15, 1998, the Corporation, formerly known as
BAP Acquisition Corp., changed its name to REII Incorporated.
The Corporation entered into an agreement represented by a
Letter of Intent dated January 15, 1996 to acquire and operate
residential rental properties and one commercial office property owned
by Garfield Ricketts, a 60% shareholder. The properties are valued at
approximately $2 million, which was determined based on the properties'
market value according to 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.
Certain amounts in the prior year financial statements have
been reclassified to conform with the current year presentation.
REII Incorporated (Formerly BAP Acquisition Corp.) and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Revenue Sources
The company generates revenue primarily from the rental of
residential property, representing approximately 80% of total revenues,
and real estate management services, representing approximately 20% 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 September 30, 1999 and December 31, 1998
was 90.0% and 85.5%, respectively.
The Company's source of working capital is from rental operating
activities and prior capital contributions from stockholders. The
Company has not borrowed any moneys from financial institutions for
working capital needs. All debts of the Company are from first
mortgages on income producing properties.
Net cash provided by operating activities for the nine month
periods ended September 30, 1999 and 1998 was negative $2,694 and
positive $508, respectively. The negative cash flow in 1999 was
primarily due to payment of current liabilities.
The Company recently upgraded its computer systems to be year
2000 compliant. The Company has not been informed of any material risks
associated with its vendors regarding year 2000 compliance, however,
there is no guarantee that such risks do not exist and will not have an
adverse effect on operations. Management is continuing to assess any
impact that the transition to the year 2000 will have on operations.
Due to the nature of the Company's business, it is not anticipated that
any impact would be material, however the cost of a potential impact is
not determinable.
-7-
<PAGE>
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
future results of operations of the Company.
Capital Expenditures and Financing Requirements
The Company purchased five (5) residential rental properties
from Garfield Ricketts, a 60% shareholder, for $544,000 on December 18,
1998. The purchase price was based on the total of the properties'
market values established by an independent appraiser. The acquisition
was financed with bank mortgages in the amount of $359,100 and mortgages
to Garfield Ricketts in the amount of $184,900.
Capital expenditures for improvements to income producing
properties during the nine month periods ended September 30, 1999 and
1998 totaled $2,642 and $7,084, respectively. Capital expenditures for
purchases of office equipment and furniture during the nine month
periods ended September 30, 1999 and 1998 totaled $1,643 and $2,431,
respectively. Net cash flows from financing activities for the nine
month period ended September 30, 1999 was $23,527, which included net
proceeds of $37,312 from refinancing two existing mortgages on income
producing rental properties. There were no real property acquisitions
during the nine month periods.
The Company has an agreement represented by a Letter of Intent
to purchase 20 residential rental properties and one commercial office
property from Garfield Ricketts, a majority stockholder. Purchase price
upon acquisition will be the properties' market value, based on
independent appraisals. Market value of the 21 properties is currently
approximately $2 million, 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 of
approximately $1,302,000 as of December 31, 1998, and pay the balance of
the market value to Garfield Ricketts in cash or other form of payment
acceptable to him. All properties to be acquired will be subject to an
updated independent property appraisal.
The Company will require funds to acquire additional income
producing properties and/or real estate related entities. The Company
will seek to borrow funds from financial institutions and raise money
through the offering of its common stock. 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
-8-
<PAGE>
</TABLE>
<TABLE>
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:
<CAPTION>
Three Month Period Nine Month Period
Ended September 30 Ended September 30
1999 1998 1999 1998
________ ________ ________ ________
<S> <C> <C> <C> <C>
Revenues
Rental Income 80.9% 47.5% 78.6% 61.0%
Management Services 16.8% 22.6% 16.8% 27.0%
Commissions 02.3% 29.7% 04.5% 11.8%
Interest and Other 00.0% 00.2% 00.1% 00.2%
________ ________ ________ ________
Total Revenues 100.0% 100.0% 100.0% 100.0%
________ ________ ________ ________
Expenses
Direct Expenses:
Depreciation 05.6% 09.2% 17.8% 10.2%
Interest 36.2% 14.1% 30.1% 16.9%
Real Estate Taxes 13.7% 09.0% 12.9% 10.8%
Repairs and Maintenance 10.8% 09.9% 11.0% 16.0%
Utilities 02.5% 05.7% 02.4% 04.7%
Insurance 06.9% 05.6% 06.5% 05.9%
Other Direct Expenses 05.2% 01.5% 03.6% 03.2%
________ ________ ________ ________
Total Direct Expenses 80.9% 55.0% 84.3% 67.7%
________ ________ ________ ________
General and Administrative Expenses:
Office Occupancy Expense 06.9% 08.6% 06.7% 11.0%
Office Expense 03.6% 03.4% 02.2% 03.9%
Professional Fees 04.6% 00.4% 09.9% 01.5%
License, Dues, and Fees 00.9% (02.4)% 10.8% 02.3%
Depreciation and Amortization 14.3% 10.7% 13.3% 12.7%
Other Administrative Expenses 05.2% 08.0% 05.4% 09.5%
________ ________ ________ ________
Total General and
Administrative Expenses 35.5% 28.7% 48.3% 40.9%
________ ________ ________ ________
Total Expenses 116.4% 83.7% 132.6% 108.6%
________ ________ ________ ________
Income (Loss) Before Benefit/(Provision)
for Taxes (16.4)% 16.3% (32.6)% (08.6)%
Provision for Taxes 0.00% 00.0% 00.0% 00.0%
________ ________ ________ ________
Net Loss (16.4)% 16.3% (32.6)% (08.6)%
________ ________ ________ ________
-9-
<PAGE>
Nine Months Ended September 30, 1999 Compared With Nine Months Ended
September 30, 1998
Net Income (Loss)
The Company reported a net loss of $36,387 for the nine months
ended September 30, 1999, compared to a net loss of $5,500 for the nine
months ended September 30, 1998. The losses were primarily due to
depreciation, refinancing fees, legal fees paid to register with the
National Association of Securities Dealers, and write off of
organization costs in accordance with the American Institute of
Certified Public Accountants' Statement of Position 98-5 on reporting
the costs of start-up activities.
Revenues
Total revenues for the nine months ended September 30, 1999
increased by $47,507 (74.1%) to $111,645 from $64,138 for the nine
months ended September 30, 1998. The increase was due primarily to
rental income received from the addition of five (5) new rental
properties, which were purchased in December 1998.
Direct Expenses
Direct expenses for the nine months ended September 30, 1999
increased by $50,719 (116.9%) to $94,111 (84.3% of total revenues) from
$43,392 (67.7% of total revenues) for the nine months ended September
30, 1998. The increase was due primarily to the addition of five (5)
new rental properties, which were purchased in December 1998.
General and Administrative Expenses
General and administrative expenses for the nine months ended
September 30, 1999 increased by $27,675 (105.4%) to $53,921 (48.3% of
total revenues) from $26,246 (40.9% of total revenues) for the nine
months ended September 30, 1998. The increase was due primarily to fees
paid to refinance two mortgages in 1999, legal fees paid to register
with the National Association of Securities Dealers, and write off of
organization costs in accordance with the American Institute of
Certified Public Accountants' Statement of Position 98-5 on reporting
the costs of start-up activities.
Income Taxes
There were no provisions for income tax for the nine month
periods ended September 30, 1999 and 1998 because the Company was
operating at a loss.
Three Months Ended September 30, 1999 Compared With Three Months Ended
September 30, 1998
Net Income (Loss)
The Company reported a net loss of $5,773 for the three months
ended September 30, 1999, compared to net income of $4,170 for the three
months ended September 30, 1998. The loss in 1999 was primarily due to
depreciation, refinancing fees, legal fees paid to register with the
National Association of Securities Dealers, and write-off organization
costs in accordance with the American Institute of Certified Public
Accountants' Statement of Position 98-5 on reporting the costs of
start-up activities.
-10-
<PAGE>
Revenues
Total revenues for the three months ended September 30, 1999
increased by $9,643 (37.8%) to $35,180 from $25,537 for the three months
ended September 30, 1998. The increase was due primarily to rental
income received from the addition of five (5) new rental properties,
which were purchased in December 1998.
Direct Expense
Direct expenses for the three months ended September 30, 1999
increased by $14,389 (102.4%) to $28,446 (80.9% of total revenues) from
$14,057 (55.0% of total revenues) for the three months ended September
30, 1998. The increase was due primarily to the addition of five (5)
new rental properties, which were purchased in December 1998.
General and Administrative Expenses
General and administrative expenses for the three months ended
September 30, 1999 increased by $5,197 (71.1%) to $12,507 (35.5% of
total revenues) from $7,310 (28.7% of total revenues) for the three
months ended September 30, 1998. The increase was due primarily to fees
paid to refinance two mortgages in 1999, legal fees paid to register
with the National Association of Securities Dealers, and write off of
organization costs in accordance with the American Institute of
Certified Public Accountants' Statement of Position 98-5 on reporting
the costs of start-up activities.
Income Taxes
There were no provisions for income tax for the three month
periods ended September 30, 1999 and 1998 because the Company was
operating at a loss.
PART 11
ITEM 1
Legal Proceedings
The Company is not presently a party to any litigation of any kind or
nature whatsoever, nor to the company's best knowledge and belief is any
litigation threatened or contemplated.
ITEM 2
Change in Securities.
There has not been any material changes of the rights of holders of
registered securities, and working capital restrictions and other
limitations on the payment of dividends.
ITEM 3
Defaults Upon Senior Securities.
There has not been any defaults on any senior Securities.
ITEM 4
Submission of Matters to a vote of Security Holders.
On December 30th, 1998 the annual meeting of the Company was held at the
Company's principal office, at 1051-5th Avenue North in Naples Florida.
Of the 4,655,310 shares outstanding, 3,664,932 were represented in person
and by proxy. The sole purpose of the meeting was to re-elect the Officers
and Directors.
The following officers and Directors were unanimously elected.
Garfield Ricketts Director/ Chairman/CEO
Una M. Ricketts Director/Secretary/Treasurer
Karen Ricketts Director
-11-
<PAGE>
There were no setlements or matters or solicitations under Rule 14a-11
ITEM 5
Other Matters
None
ITEM 6
Exhibits 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 October 26, 1999
REII INCORPORATED
(Formerly BAP Acquisition Corp.)
by /s/ Garfield Ricketts by /s/ Una M. Ricketts
- ------------------------- ------------------------
Garfield Ricketts-President Una M. Ricketts-Secretary/Treasurer
-12-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000743241
<NAME> REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP)
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 21541
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 858494
<PP&E> 755754
<DEPRECIATION> 0
<TOTAL-ASSETS> 858494
<CURRENT-LIABILITIES> 779909
<BONDS> 0
0
0
<COMMON> 4655
<OTHER-SE> 336381
<TOTAL-LIABILITY-AND-EQUITY> 858494
<SALES> 0
<TOTAL-REVENUES> 111645
<CGS> 0
<TOTAL-COSTS> 148032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33575
<INCOME-PRETAX> 0
<INCOME-TAX> (36387)
<INCOME-CONTINUING> 0
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<NET-INCOME> (36387)
<EPS-BASIC> (.008)
<EPS-DILUTED> (.008)
</TABLE>
