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 March 31,1999 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 March 31, 1999 4,655,310 shares of common stock, $.001 par were
outstanding.
<PAGE>
PART 1
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
FINANCIAL REPORTS
AT
MARCH 31, 1999 AND 1998
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A DELAWARE CORPORTION)
NAPLES, FLORIDA
TABLE OF CONTENTS
Consolidated Balance Sheets at March 31, 1999 (Unaudited)
and December 31, 1998 2
Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 1998 (Unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (Unaudited) 4
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 11
Item #6 Exhibits and reports on form 8-K 11
Item #6 Signatures 11
<PAGE>
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED BALANCE SHEETS AT
MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1999 1998
________ ___________
<S> <C> <C>
Assets
Revenue Producing Assets -
Net of Accumulated Depreciation $ 767,025 $ 772,933
Land Held for Investment 24,000 24,000
Cash and Cash Equivalents 28,483 4,993
Other Current Assets 4,029 5,353
Tenant Escrow Account 36,637 32,033
Property and Equipment -
Net of Accumulated Depreciation 7,260 7,715
Organization Costs -
Net of Accumulated Amortization 15,537 17,867
________ ________
Total Assets $ 882,971 $ 864,894
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgages Payable - Bank $ 530,804 $ 495,528
Mortgages Payable - Stockholder 184,596 184,900
Accounts Payable and Accrued Expenses 3,309 5,712
Tenant Escrow Liability 36,637 32,033
Due to Stockholder 25,324 31,749
________ ________
Total Liabilities $ 780,670 $ 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 (238,735) (226,064)
________ ________
Total Stockholders' Equity $ 102,301 $ 114,972
________ ________
Total Liabilities and Stockholders' Equity $ 882,971 $ 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 MARCH 31, 1999 AND 1998 (UNAUDITED)
<CAPTION>
1999 1998
_______ _______
<S> <C> <C>
Revenues
Management Services $ 5,553 $ 5,738
Rental Income 30,195 13,569
Commissions 4,200 ---
Interest and Other 72 ---
_______ _______
Total Revenues $ 40,020 $ 19,307
_______ _______
Direct Expenses
Advertising $ 243 $ 138
Commissions and Management Fees 1,120 115
Depreciation and Amortization 8,913 4,415
Insurance 2,422 1,546
Interest 9,041 3,615
Real Estate Taxes 4,815 2,312
Repairs and Maintenance 4,449 4,979
Utilities 746 612
_______ _______
Total Direct Expenses $ 31,749 $ 17,732
_______ _______
General and Administrative Expenses
Contributions $ 110 $ 75
Depreciation 455 365
Dues and Subscriptions 977 1,110
Licenses, Dues and Fees 12,944 1,026
Occupancy Expenses 2,936 2,272
Office Supplies and Expense 580 547
Professional Fees 1,650 819
Telephone 916 947
Travel and Entertainment 374 103
_______ _______
Total General and
Administrative Expenses $ 20,942 $ 7,264
_______ _______
Total Expenses $ 52,691 $24,996
_______ _______
-3-
<PAGE>
</TABLE>
<TABLE>
<CAPTION> 1999 1998
___________ __________
<S> <C> <C>
Loss Before Provision for Taxes $(12,671) $(5,689)
Provision for Taxes --- ---
_______ _______
Net Loss for the Period $(12,671) $ (5,689)
_______ _______
Loss per Common Share: $(.003) $(.001)
_________ _________
Weighted Average
Number of Common 4,655,310 4,655,310
Shares Outstanding _________ _________
REII INCORPORATED
(FORMERLY BAP ACQUISITION CORP.)
AND SUBSIDIARY
(A Delaware Corporation)
Naples, Florida
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
1999 1998
_______ _______
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $(12,671) $ (5,689)
Adjustments to Reconcile
Net Loss to Net Cash Flows
from Operating Activities:
Amortization 2,331 2,331
Depreciation 7,037 2,449
Changes in Assets and Liabilities:
Rents Receivable --- 512
Other Current Assets 1,324 (2,715)
Cash Overdraft --- ---
Accounts Payable and Accrued Expenses (2,403) (12,516)
_______ _______
Net Cash Flows from
Operating Activities $(4,382) $(15,628)
_______ _______
-4-
<PAGE>
<CAPTION>
1999 1998
_________ _______
<S> <C> <C>
Cash Flows from Investing Activities
Acquisition of Office Furniture and Equipment $ --- $ (1,271)
Improvements to Income Producing Properties (675) ---
_______ _______
Net Cash Flows from
Investing Activities $ (675) $ (1,271)
_______ _______
Cash Flows from Financing Activities
Mortgage Refinancing $ 37,312 $ ---
Repayment of Mortgages (2,340) (1,133)
Change in Due to Stockholder (6,425) 14,241
_______ _______
Net Cash Flows from
Financing Activities $ 28,547 $ 13,108
_______ _______
Net Decrease in Cash and Cash Equivalents $ 23,490 $ (3,791)
Cash and Cash Equivalents -
Beginning of Period 4,993 13,486
_______ _______
Cash and Cash Equivalents -
End of Period $ 28,483 $ 9,695
_______ _______
Supplementary Disclosures
Interest Paid $ 9,041 $ 3,615
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 - 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 C - 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.
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 and commissions, 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 March 31, 1999 and December 31, 1998 was
87.5% and 85.6%, 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 debts of the Company are first mortgages on income producing
properties.
Net cash provided by operating activities for the three month
periods ended March 31, 1999 and 1998 was negative $4,382 and negative
$15,628, 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% stockholder, 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 three month periods ended March 31, 1999 and 1998
totaled $675 and $-0-, respectively. Capital expenditures for purchases
of office equipment and furniture during the three month periods ended
March 31, 1999 and 1998 totaled $-0- and $1,271, respectively. There
were no real property acquisitions during the three 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 and also to
register its securities with the National Association of Securities
Dealers. The Company will seek to borrow funds from financial
institutions or 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
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:
-8-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Three Month Period
Ended March 31
1999 1998
_______ _______
<S> <C> <C>
Revenues
Rental Income 75.4% 70.3%
Management Services 13.9% 29.7%
Commissions 10.5% .0%
Interest and Other .2% .0%
_______ _______
Total Revenues 100.0% 100.0%
_______ _______
Expenses
Direct Expenses:
Depreciation and Amortization 22.3% 22.8%
Interest 22.6% 18.7%
Real Estate Taxes 12.0% 12.0%
Repairs and Maintenance 11.1% 25.8%
Utilities 1.9% 3.2%
Insurance 6.1% 8.0%
Other Direct Expenses 3.4% 1.3%
_______ _______
Total Direct Expenses 79.4% 91.8%
_______ _______
General and Administrative Expenses
Office Occupancy Expense 7.3% 11.8%
Office Supplies and Expense 1.5% 2.9%
Professional Fees 4.1% 4.2%
Telephone 2.3% 4.9%
Dues and Subscriptions 2.4% 5.7%
License, Dues, and Fees 32.4% 5.3%
Travel and Entertainment .9% .5%
Other Administrative Expenses 1.4% 2.3%
_______ _______
Total General and Administrative Expenses 52.3% 37.6%
_______ _______
Total Expenses 131.7% 129.4%
_______ _______
Income (Loss) Before Provision for Taxes (31.7)% (29.4)%
Provision for Taxes .0% .0%
_______ _______
Net Income (Loss) (31.7)% (29.4)%
_______ _______
Three Months Ended March 31, 1999 Compared With Three Months Ended March
31, 1998
-9-
<PAGE>
Net Income (Loss)
The Company reported a net loss of $12,671 for the three months
ended March 31, 1999, compared to a net loss of $5,689 for the three
months ended March 31, 1998. The losses were primarily due to
depreciation and refinancing fees.
Revenues
Total revenues for the three months ended March 31, 1999
increased by $20,713 (105.1%) to $40,020 from $19,307 for the three
months ended March 31, 1998. The increase was due primarily to 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 three months ended March 31, 1999
increased by $14,017 (79.0%) to $31,749 (79.4% of total revenues) from
$17,732 (91.8% of total revenues) for the three months ended March 31,
1998. The increase was due primarily to the addition of new rental
properties. The decrease in direct expenses as a percentage of total
revenues is due to the increase in commission revenues from the sale of
homes in 1999.
General and Administrative Expenses
General and administrative expenses for the three months ended
March 31, 1999 increased by $13,678 (188.3%) to $20,942 (52.3% of total
revenues) from $7,264 (37.6% of total revenues) for the three months
ended March 31, 1998. The increase was due primarily to fees paid to
refinance two mortgages in 1999.
Income Taxes
There were no provisions for income tax for the three month
periods ended March 31, 1999 and 1998 because the Company was operating
at a loss.
-10-
<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
There were no Form 8-K exhibits reported in this quarter.
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 5, 1999
BAP ACQUISITION CORP
by /s/ Garfield Ricketts by /s/ Una M. Ricketts
- ------------------------- ------------------------
Garfield Ricketts-President Una M. Ricketts-Secretary/Treasurer
-11-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 24483
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 882971
<PP&E> 767025
<DEPRECIATION> 0
<TOTAL-ASSETS> 882971
<CURRENT-LIABILITIES> 780670
<BONDS> 0
0
0
<COMMON> 4655
<OTHER-SE> 336381
<TOTAL-LIABILITY-AND-EQUITY> 882971
<SALES> 0
<TOTAL-REVENUES> 40,020
<CGS> 0
<TOTAL-COSTS> 31,749
<OTHER-EXPENSES> 20,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,671)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,671)
<EPS-PRIMARY> (.003)
<EPS-DILUTED> 0
</TABLE>
