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 June 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 June 30, 1999 4,655,310 shares of common stock, $.001 par were
outstanding.
<PAGE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
FINANCIAL REPORTS
AT
JUNE 30, 1999 AND 1998
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORTION)
NAPLES, FLORIDA
TABLE OF CONTENTS
Consolidated Balance Sheets at June 30, 1999 (Unaudited)
and December 31, 1998 2
Consolidated Statements of Operations for the Three Months Ended
June 30, 1999 and 1998 (Unaudited) and for the Six Months Ended
June 30, 1999 and 1998 (Unaudited) 3-4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (Unaudited) 5
Notes to the Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of Financial Conditions
and Results of Operations 7
PART 11
Item 1
Legal Proceedings 12
Item 2.
Change In Securities 12
Item 3.
Defaults Upon Senior Securities 12
Item 4.
Submission of Matters to vote of Security Holders 12
Item 5,
Other Matters 12
Item 6,
Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
<TABLE>
REII INCORPORATED
(FORMERLY BAP ACQUISITON CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED BALANCE SHEETS AT
JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
<CAPTION>
ASSETS
June 30, December 31,
1999 1998
_________ ___________
<S> <C> <C>
Assets
Revenue Producing Assets -
Net of Accumulated Depreciation $ 761,467 $ 772,933
Land Held for Investment 24,000 24,000
Cash and Cash Equivalents 23,845 4,993
Other Current Assets 5,600 5,353
Tenant Escrow Account 38,736 32,033
Office Property and Equipment -
Net of Accumulated Depreciation 6,805 7,715
Organization Costs -
Net of Accumulated Amortization 8,934 17,867
_________ _________
Total Assets $ 869,387 $ 864,894
_________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgages Payable - Bank $ 528,496 $ 495,528
Mortgages Payable - Stockholder 184,153 184,900
Accounts Payable and Accrued Expenses 2,894 5,712
Tenant Escrow Liability 38,736 32,033
Due to Stockholder 26,089 31,749
_________ _________
Total Liabilities $ 780,368 $ 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 (252,017) (226,064)
_________ _________
Total Stockholders' Equity $ 89,019 $ 114,972
_________ _________
Total Liabilities and Stockholders' Equity $ 869,387 $ 864,894
_________ __________
-2-
<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 JUNE 30, 1999 AND 1998 (UNAUDITED) AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
________ ________ _________ ________
<S> <C> <C> <C> <C>
Revenues
Management Services $ 7,232 $ 5,814 $ 12,785 $ 11,552
Rental Income 29,150 13,408 59,345 26,977
Commissions --- --- 4,200 ---
Interest and Other 63 72 135 72
________ ________ _________ ________
Total Revenues $ 36,445 $ 19,294 $ 76,465 $ 38,601
________ ________ _________ ________
Direct Expenses
Advertising $ --- $ 954 $ 243 $ 1,092
Commissions and Management Fees 777 462 1,897 577
Depreciation 6,609 2,110 13,191 4,194
Insurance 2,422 773 4,844 2,319
Interest 11,793 3,623 20,834 7,238
Real Estate Taxes 4,815 2,291 9,630 4,603
Repairs and Maintenance 4,079 2,754 8,528 7,733
Utilities 1,091 967 1,837 1,579
________ ________ _________ ________
Total Direct Expenses $ 31,586 $ 13,934 $61,004 $ 29,335
________ ________ _________ ________
General and Administrative Expenses
Contributions $ 10 $ 100 $ 120 $ 175
Depreciation and Amortization 7,057 2,754 9,843 5,450
Licenses, Dues and Fees (1,240) 1,084 11,704 2,110
Office Occupancy Expenses 2,119 2,586 5,055 4,858
Office Expense 2,418 2,746 5,265 5,453
Professional Fees 7,777 71 9,427 890
________ ________ _________ ________
Total General and
Administrative Expenses $ 18,141 $ 9,341 $ 41,414 $ 18,936
________ ________ _________ ________
Total Expenses $ 49,727 $ 23,275 $102,418 $ 48,271
________ ________ _________ ________
-3-
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</TABLE>
<TABLE>
<CAPTION> Three Months Six Mpnths
Ended June 30, Ended June 30
1999 1998 1999 1998
_______ _______ ________ ______
<S> <C> <C> <C> <C>
Loss Before Provision for Taxes $(13,282) $ (3,981) $(25,953) $ (9,670)
Provision for Taxes --- --- --- ---
________ ________ _________ ________
Net Loss for the Period $(13,282) $ (3,981) $(25,953) $ (9,670)
________ ________ _________ ________
Loss per Common Share: $(.003) $(.001) $(.006) $(.002)
_________ _________ _________ _________
Weighted Average
Number of Common
Shares Outstanding 4,655,310 4,655,310 4,655,310 4,655,310
_________ _________ _________ ________
-4-
<PAGE>
</TABLE>
<TABLE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
<CAPTION> 1999 1998
1999 1998
________ ________
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $(25,953) $ (9,670)
Adjustments to Reconcile
Net Loss to Net Cash Flows
from Operating Activities:
Amortization 8,933 4,661
Depreciation 14,101 4,983
Changes in Assets and Liabilities:
Rents Receivable --- 289
Other Current Assets (247) (1,698)
Accounts Payable and Accrued Expenses (2,818) (12,161)
________ ________
Net Cash Flows from
Operating Activities $ (5,984) $(13,596)
________ ________
Cash Flows from Investing Activities
Acquisition of Office Furniture and Equipment $ --- $ (2,430)
Improvements to Income Producing Properties (1,725) (1,113)
________ ________
Net Cash Flows from
Investing Activities $ (1,725) $ (3,543)
________ ________
Cash Flows from Financing Activities
Mortgage Refinancing $ 37,312 $ ---
Repayment of Mortgages (5,091) (2,294)
Change in Due to Stockholder (5,660) 15,728
________ ________
Net Cash Flows from
Financing Activities $ 26,561 $ 13,434
________ ________
Net Decrease in Cash and Cash Equivalents $ 18,852 $ (3,705)
Cash and Cash Equivalents -
Beginning of Period 4,993 13,486
________ ________
Cash and Cash Equivalents -
End of Period $ 23,845 $ 9,781
________ ________
Supplementary Disclosures
Interest Paid $ 20,834 $ 7,238
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 70% 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 June 30, 1999 and December 31, 1998 was
88.9% and 85.6%, 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 six month
periods ended June 30, 1999 and 1998 was negative $5,984 and negative
$13,596, respectively. The negative cash flows were 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 six month periods ended June 30, 1999 and 1998
totaled $1,725 and $1,113, respectively. Capital expenditures for
purchases of office equipment and furniture during the six month periods
ended June 30, 1999 and 1998 totaled $-0- and $2,430, respectively.
There were no real property acquisitions during the six 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 Six Month Period
Ended June 30 Ended June 30
1999 1998 1999 1998
________ _______ _______ ________
<S> <C> <C> <C> <C>
Revenues
Rental Income 80.0% 30.1% 77.6% 69.9%
Management Services 19.8% 69.5% 16.7% 30.0%
Commissions 00.0% 00.0% 5.5% 00.0%
Interest and Other 0.2% 0.4% 0.2% 0.1%
________ ________ ________ ________
Total Revenues 100.0% 100.0% 100.0% 100.0%
________ _______ ________ ________
Expenses
Direct Expenses:
Depreciation 18.1% 10.9% 17.2% 10.9%
Interest 32.4% 18.8% 27.2% 18.8%
Real Estate Taxes 13.2% 11.9% 12.6% 11.9%
Repairs and Maintenance 11.2% 14.3% 11.2% 20.0%
Utilities 3.0% 5.0% 2.4% 4.1%
Insurance 6.6% 4.0% 6.3% 6.0%
Other Direct Expenses 2.1% 7.3% 2.8% 4.3%
________ ________ ________ ________
Total Direct Expenses 86.6% 72.2% 79.7% 76.0%
________ _______ ________ ________
General and Administrative Expenses:
Office Occupancy Expense 5.8% 13.4% 6.6% 12.6%
Office Expense 1.6% 5.5% 1.5% 4.2%
Professional Fees 21.3% 0.4% 12.3% 2.3%
License, Dues, and Fees (3.4)% 5.5% 15.3% 5.5%
Depreciation and Amortization 19.4% 14.3% 12.9% 14.1%
Other Administrative Expenses 5.1% 9.3% 5.6% 10.4%
________ ________ ________ ________
Total General and
Administrative Expenses 49.8% 48.4% 54.2% 49.1%
________ ________ ________ ________
Total Expenses 136.4% 120.6% 133.9% 125.1%
________ ________ ________ ________
Loss Before Provision for Taxes (36.4)% (20.6)% (33.9)% (25.1)%
Provision for Taxes 00.0% 00.0% 00.0% 00.0%
________ ________ ________ ________
Net Loss (36.4)% (20.6)% (33.9)% (25.1)%
________________ ________ ________
-9-
<PAGE>
Six Months Ended June 30, 1999 Compared With Six Months Ended June 30,
1998
Net Income (Loss)
The Company reported a net loss of $25,953 for the six months
ended June 30, 1999, compared to a net loss of $9,670 for the six months
ended June 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 six months ended June 30, 1999 increased
by $37,864 (98.1%) to $76,465 from $38,601 for the six months ended June
30, 1998. The increase was due primarily to rental income received from
the addition of five (5) new rental properties and the receipt of
commission revenues from the sale of homes.
Direct Expenses
Direct expenses for the six months ended June 30, 1999 increased
by $31,669 (108.0%) to $61,004 (79.7% of total revenues) from $29,335
(76.0% of total revenues) for the six months ended June 30, 1998. The
increase was due primarily to the addition of new rental properties.
General and Administrative Expenses
General and administrative expenses for the six months ended
June 30, 1999 increased by $22,478 (118.7%) to $41,414 (54.2% of total
revenues) from $18,936 (49.1% of total revenues) for the six months
ended June 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 six month
periods ended June 30, 1999 and 1998 because the Company was operating
at a loss.
Three Months Ended June 30, 1999 Compared With Three Months Ended June
30, 1998
Net Income (Loss)
The Company reported a net loss of $13,282 for the three months
ended June 30, 1999, compared to a net loss of $3,981 for the three
months ended June 30, 1998. The losses were primarily due to
depreciation and amortization.
Revenues
Total revenues for the three months ended June 30, 1999
increased by $17,151 (88.9%) to $36,445 from $19,294 for the three
months ended June 30, 1998. The increase was due primarily to rental
income received from the addition of five (5) new rental properties.
-10-
<PAGE>
Direct Expense
Direct expenses for the three months ended June 30, 1999
increased by $17,652 (126.7%) to $31,586 (86.6% of total revenues) from
$13,934 (72.2% of total revenues) for the three months ended June 30,
1998. The increase was due primarily to the addition of new rental
properties.
General and Administrative Expenses
General and administrative expenses for the three months ended
June 30, 1999 increased by $8,800 (94.2%) to $18,141 (49.8% of total
revenues) from $9,341 (48.4% of total revenues) for the three months
ended June 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 June 30, 1999 and 1998 because the Company was operating
at a loss.
-11-
<PAGE>
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
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
-12-
<PAGE>
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 May 13th, 1999
BAP ACQUISITION CORP
by /s/ Garfield Ricketts by /s/ Una M. Ricketts
- ------------------------- ------------------------
Garfield Ricketts-President Una M. Ricketts-Secretary/Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 23845
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 869387
<PP&E> 761467
<DEPRECIATION> 0
<TOTAL-ASSETS> 869397
<CURRENT-LIABILITIES> 780368
<BONDS> 0
0
0
<COMMON> 4655
<OTHER-SE> 336381
<TOTAL-LIABILITY-AND-EQUITY> 869387
<SALES> 0
<TOTAL-REVENUES> 76465
<CGS> 0
<TOTAL-COSTS> 102418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20834
<INCOME-PRETAX> 0
<INCOME-TAX> (25953)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25953)
<EPS-BASIC> (.006)
<EPS-DILUTED> (.006)
</TABLE>
