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 30,2000 Commission File Number 21-16563-B
REII INCORPORATED
(Formerly Bap Acquisition Corp.)
-----------------------------------------------------
( Exact Name of Registrant as Specified in its Charter)
DELAWARE 51-0373876
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(State or other Jurisdiction of (IRS Employee Number)
(Incorporation Or Organization)
1051 FIFTH AVENUE NORTH, NAPLES, FLORIDA 34102
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(Address of Principal Executive Offices) (Zip Code)
(941) 261-3396
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(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, 2000 4,655,310 shares of common stock, $.001 par were
outstanding.
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PART 1. FINANCIAL INFORMATION.
FINANCIAL REPORTS
AT
JUNE 30, 2000 AND 1999
REII INCORPORATED
AND SUBSIDIARIES
(A DELAWARE CORPORATION)
NAPLES, FLORIDA
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TABLE OF CONTENTS
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Independent Accountant's Report F-1
Consolidated Balance Sheets at June 30, 2000
(Unaudited) and December 31, 1999 F-2
Consolidated Statements of Operations for the Three Months
Ended June 30, 2000 and 1999 (Unaudited) and for the Six
Months Ended June 30, 2000 and 1999 (Unaudited) F-3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (Unaudited) F-4
Notes to the Consolidated Financial Statements (Unaudited) F-5
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INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
and Shareholders
REII Incorporated and Subsidiaries
(A Delaware Corporation)
Naples, Florida
We have reviewed the accompanying consolidated balance sheet of REII
Incorporated and Subsidiaries as of June 30, 2000, and the related
consolidated statements of operations for the three and six month periods
ended June 30, 2000 and 1999, and the related consolidated statements of
cash flows for the six month periods ended June 30, 2000 and 1999 in
accordance with standards established by the American Institute of Certified
Public Accountants. All information included in these consolidated
financial statements is the responsibility of the Company's management.
A review of interim financial information consists principally of
inquiries of Company personnel and analytical procedures applied to the
financial data. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of REII Incorporated and
Subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999, and in our
report dated February 12, 2000, we expressed an unqualified opinion on those
consolidated financial statements.
Rotenberg & Company, LLP
Rochester, New York
July 25, 2000
F-1
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REII INCORPORATED AND SUBSIDIARIES
(A DELAWARE CORPORATION)
Naples, Florida
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CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31,
1999
___________________________________________________________________________
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(Unaudited)
June 30, December 31,
2000 1999
___________________________________________________________________________
<S> <C> <C>
ASSETS
Revenue Producing Assets -
Net of Accumulated Depreciation $ 1,712,819 $ 750,763
Land Held for Investment 24,000 24,000
Cash and Cash Equivalents 18,941 19,439
Other Current Assets 5,018 8,681
Tenant Escrow Account 40,863 39,483
Office Property and Equipment -
Net of Accumulated Depreciation 6,904 7,422
___________________________________________________________________________
Total Assets $ 1,808,545 $ 849,788
___________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgages Payable - Banks $ 1,107,052 $ 524,919
Mortgages Payable - Stockholder 503,305 183,201
Accounts Payable and Accrued Expenses 2,609 4,319
Tenant Escrow Liability 40,863 39,483
Due to Stockholder 51,019 28,744
___________________________________________________________________________
Total Liabilities 1,704,848 780,666
___________________________________________________________________________
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 405,426 336,381
Deficit (306,384) (271,914)
___________________________________________________________________________
Total Stockholders' Equity 103,697 69,122
___________________________________________________________________________
Total Liabilities and Stockholders' Equity $ 1,808,545 $ 849,788
___________________________________________________________________________
F-2
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REII INCORPORATED AND SUBSIDIARIES
(A DELAWARE CORPORATION)
Naples, Florida
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
___________________________________________________________________________
<S>
Three Months Six Months
Ended June 30, Ended June 30,
<C> <C> <C> <C>
2000 1999 2000 1999
___________________________________________________________________________
Revenues
Management Services $ 3,912 $ 7,232 $ 9,692 $12,785
Rental Income 51,760 29,150 94,950 59,345
Commissions - - - 4,200
Interest and Other 109 63 109 135
___________________________________________________________________________
Total Revenues 55,781 36,445 104,751 76,465
___________________________________________________________________________
Expenses
Direct Expenses
Advertising 237 - 547 243
Commissions and Management Fees 777 777 2,059 1,897
Depreciation 14,268 6,609 27,929 13,191
Insurance 2,771 2,422 6,084 4,844
Interest 32,237 11,793 49,860 20,834
Real Estate Taxes 6,660 4,815 13,321 9,630
Repairs and Maintenance 10,949 4,079 16,181 8,528
Utilities 1,550 1,091 2,704 1,837
___________________________________________________________________________
Total Direct Expenses 69,449 31,586 118,685 61,004
___________________________________________________________________________
General and Administrative Expenses
Contributions 50 10 210 120
Depreciation and Amortization 523 7,057 1,046 9,843
Dues and Subscriptions 275 670 1,258 1,647
Licenses, Dues and Fees 525 (1,240) 5,378 11,704
Occupancy Expenses 567 2,119 1,947 5,055
Office Supplies and Expense 351 566 1,264 1,146
Professional Fees 3,195 7,777 6,805 9,427
Telephone 961 964 1,949 1,880
Travel and Entertainment 506 218 679 592
___________________________________________________________________________
Total General and Administrative
Expenses 6,953 18,141 20,536 41,414
Total Expenses 76,402 49,727 139,221 102,418
___________________________________________________________________________
Loss Before Provision for Taxes (20,621) (13,282) (34,470) (25,953)
___________________________________________________________________________
Provision for Taxes - - - -
___________________________________________________________________________
Net Loss for the Period $ (20,621) $(13,282) $(34,470) $(25,953)
___________________________________________________________________________
Loss Per Common Share $(0.004) $ (0.003) $(0.007) $ (0.006)
___________________________________________________________________________
Weighted Average Number of Common
Shares Outstanding 4,655,310 4,655,310 4,655,310 4,655,310
___________________________________________________________________________
F-3
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REII INCORPORATED AND SUBSIDIARIES
(A DELAWARE CORPORATION)
Naples, Florida
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
___________________________________________________________________________
Six Months Ended June 30, 2000 1999
___________________________________________________________________________
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Cash Flows from Operating Activities
Net Loss $ (34,470) $ (25,953)
Adjustments to Reconcile Net Loss
to Net Cash Flows from Operating Activities:
Amortization - 8,933
Depreciation 28,975 14,101
Changes in Assets and Liabilities:
Other Current Assets 3,663 (247)
Accounts Payable and Accrued Expenses (1,710) (2,818)
___________________________________________________________________________
Net Cash Flows from Operating Activities (3,542) (5,984)
___________________________________________________________________________
Cash Flows from Investing Activities
Acquisition of Office Equipment (528) -
Improvements to Income Producing Properties (14,485) (1,725)
___________________________________________________________________________
Net Cash Flows from Investing Activities (15,013) (1,725)
___________________________________________________________________________
Cash Flows from Financing Activities
Mortgage Refinancing - 37,312
Stockholder Contribution 3,545 -
Repayment of Mortgages (7,763) (5,091)
Change in Due to Stockholder 22,275 (5,660)
___________________________________________________________________________
Net Cash Flows from Financing Activities 18,057 26,561
___________________________________________________________________________
Net Increase (Decrease) in Cash and Cash Equivalents (498) 18,852
Cash and Cash Equivalents - Beginning of Period 19,439 4,993
___________________________________________________________________________
Cash and Cash Equivalents - End of Period $ 18,941 $ 23,845
___________________________________________________________________________
SUPPLEMENTARY DISCLOSURES
Interest Paid $ 49,860 $ 20,834
Income Taxes Paid $ - $ -
___________________________________________________________________________
NON-CASH INVESTING AND FINANCING ACTIVITIES
___________________________________________________________________________
Acquisition of Revenue Producing Assets on March 15, 2000:
with Bank Mortgage Financing $ 588,000 $ -
with Stockholder Notes Payable 322,000 -
with Stockholder Capital Contribution 65,500 -
___________________________________________________________________________
Total $ 975,500 $ -
___________________________________________________________________________
F-4
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REII INCORPORATED AND SUBSIDIARIES
(A DELAWARE CORPORATION)
Naples, Florida
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The condensed consolidated financial statements of REII Incorporated
and Subsidiaries (the "Company") included herein have been prepared by the
Company, 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
Company 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 Company's Form 10KSB, and other reports filed
with the SEC.
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 Company 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 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
Company and its subsidiaries, Ricketts Enterprises International, Inc. and
Ricketts Enterprises of Naples, Inc. All significant intercompany balances
and transactions have been eliminated in consolidation.
Note C - Other Matters
The Company has an agreement represented by a Letter of Intent to
purchase 14 residential rental properties from Garfield Ricketts, a majority
stockholder. Purchase price upon acquisition will be the properties' market
value, based on independent appraisals. Market value of the 14 properties
is currently approximately $1,100,000 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 $543,000 as of June 30, 2000, 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.
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
F-5
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REII Incorporated and Subsidiaries
____________________________________________________
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 85% of total revenues and real estate
management services and commissions, representing approximately 15% 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, 2000 and December 31, 1999 was 94.0% and 91.1%,
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 first mortgages on income producing properties.
Net cash provided by operating activities for the six month periods ended
June 30, 2000 and 1999 was negative $3,542 and negative $5,984,
respectively. The negative cash flows were primarily due to payment of
current liabilities.
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 acquired 100% of the issued and outstanding common shares of
Ricketts Enterprises of Naples, Inc. ("RENI") on March 15, 2000. RENI was
formed on December 7, 1999 under the law of the State of Florida by two of
REII's stockholders, Garfield Ricketts, a 62% stockholder and Una Ricketts,
a 15% stockholder, for the purpose of acquiring seven (7) rental real estate
properties formerly owned by Garfield Ricketts. RENI's purchase price of
$975,500 was based on the total market value of the seven (7) properties,
established by an independent appraiser. The acquisition was financed with
bank mortgages in the amount of $588,000, mortgages to Garfield Ricketts in
the amount of $322,000 and a capital contribution from Garfield Ricketts of
$65,500.
-continued-
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REII Incorporated and Subsidiaries
___________________________________________________________________________
The Company purchased five (5) residential rental properties from Garfield
Ricketts, a 62% 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, 2000 and 1999 totaled $14,485 and
$1,725, respectively.
Capital expenditures for office equipment additions during the six month
periods ended June 30, 2000 and 1999 totaled $528 and $-0-, respectively.
Capital Expenditures and Financing Requirements - continued
The Company has an agreement represented by a Letter of Intent to purchase
14 residential rental properties from Garfield Ricketts, a majority
stockholder. Purchase price upon acquisition will be the properties' market
value, based on independent appraisals. Market value of the 14 properties
is currently approximately $1,100,000, 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 $543,000 as of March 31, 2000, 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.
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REII INCORPORATED AND SUBSIDIARIES
___________________________________________________________________________
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:
___________________________________________________________________________
Three Month Period Six Month Period
Ended June 30, Ended June 30,
2000 1999 2000 1999
___________________________________________________________________________
<S> <C> <C> <C> <C>
Revenues
Rental Income 92.8% 80.0% 90.6% 77.6%
Management Services 7.0% 19.8% 9.3% 16.7%
Commissions 0.0% 0.0% 0.0% 5.5%
Interest and Other 0.2% 0.2% 0.1% 0.2%
___________________________________________________________________________
Total Revenues 100.0% 100.0% 100.0% 100.0%
___________________________________________________________________________
Expenses
Direct Expenses:
Depreciation 25.6% 18.1% 26.7% 17.2%
Interest 57.8% 32.4% 47.6% 27.2%
Real Estate Taxes 11.9% 13.2% 12.7% 12.6%
Repairs and Maintenance 19.6% 11.2% 15.4% 11.2%
Utilities 2.8% 3.0% 2.6% 2.4%
Insurance 5.0% 6.6% 5.8% 6.3%
Other Direct Expenses 1.8% 2.1% 2.5% 2.8%
___________________________________________________________________________
Total Direct Expenses 124.5% 86.6% 113.3% 79.7%
___________________________________________________________________________
General and Administrative Expenses:
Office Occupancy Expense 1.0% 5.8% 1.9% 6.6%
Office Supplies and Expense 0.6% 1.6% 1.2% 1.5%
Professional Fees 5.7% 21.3% 6.5% 12.3%
Telephone 1.7% 2.7% 1.9% 2.5%
Dues and Subscriptions 0.5% 1.8% 1.2% 2.1%
Licenses, Dues, and Fees 1.0% (3.4)% 5.1% 15.3%
Travel and Entertainment 0.9% 0.6% 0.6% 0.8%
Other Administrative Expenses 1.1% 19.4% 1.2% 13.1%
___________________________________________________________________________
Total General and Administrative
Expenses 12.5% 49.8% 19.6% 54.2%
___________________________________________________________________________
Total Expenses 137.0% 136.4% 132.9% 133.9%
___________________________________________________________________________
Loss Before Provision for Taxes (37.0)% (36.4)% (32.9)% (33.9)%
___________________________________________________________________________
Provision for Taxes 0.0% 0.0% 0.0% 0.0%
___________________________________________________________________________
Net Loss (37.0)% (36.4)% (32.9)% (33.9)%
___________________________________________________________________________
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REII INCORPORATED AND SUBSIDIARIES
___________________________________________________________________________
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
Net Loss
The Company reported a net loss of $34,470 for the six months ended June 30,
2000, compared to a net loss of $25,953 for the six months ended June 30,
1999. The losses are primarily due to expenses incurred to acquire
additional revenue producing assets, depreciation and maintenance of the
revenue producing assets, and the write off in 1999 of organization costs in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 98-5 on reporting the costs of start-up activities.
Revenues
Total revenues for the six months ended June 30, 2000 increased by $28,286
(37.0%) to $104,751 from $76,465 for the six months ended June 30, 1999.
The increase was due primarily to rental income received from the addition
of seven (7) new rental properties, which were acquired in March, 2000.
Direct Expenses
Direct expenses for the six months ended June 30, 2000 increased by $57,681
(94.6%) to $118,685 (113.3% of total revenues) from $61,004 (79.7% of total
revenues) for the six months ended June 30, 1999. The increase was due
primarily to the addition of the new rental properties in March 2000.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2000
decreased by $20,878 (50.4%) to $20,536 (19.6% of total revenues) from
$41,414 (54.2% of total revenues) for the six months ended June 30, 1999.
The decrease was due primarily to fees paid to refinance two mortgages in
1999 that were not incurred in 2000, write of organization costs in 1999 in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 98-5 on reporting the costs of start-up activities
that was not incurred in 2000, decrease in professional fees incurred to
register with the National Association of Securities Dealers, and the
elimination of office rent expense included in occupancy expenses due to the
purchase of the office building in March 2000.
Income Taxes
There were no provisions for income tax for the six month periods ended June
30, 2000 and 1999 because the Company was operating at a loss.
REII INCORPORATED AND SUBSIDIARIES
Three Months Ended June 30, 2000 Compared With Three Months Ended June 30,
1999
Net Loss
The Company reported a net loss of $20,621 for the three months ended June
30, 2000, compared to a net loss of $13,282 for the three months ended June
30, 1999. The losses are primarily due to depreciation, maintenance of the
revenue producing assets, and amortization.
Revenues
Total revenues for the three months ended June 30, 2000 increased by $19,336
(53.1%) to $55,781 from $36,445 for the three months ended June 30, 1999.
The increase was due primarily to rental income received from the addition
of seven (7) new rental properties, which were acquired in March, 2000.
Direct Expense
Direct expenses for the three months ended June 30, 2000 increased by
$37,863 (119.9%) to $69,449 (124.5% of total revenues) from $31,586 (86.6%
of total revenues) for the three months ended June 30, 1999. The increase
was due primarily to the addition of the new rental properties in March
2000.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2000
decreased by $11,188 (61.7%) to $6,953 (12.5% of total revenues) from
$18,141 (49.8% of total revenues) for the three months ended June 30, 1999.
The decrease was due primarily to write of organization costs in 1999 in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 98-5 on reporting the costs of start-up activities
that was not incurred in 2000, decrease in professional fees incurred to
register with the National Association of Securities Dealers, and the
elimination of office rent expense included in occupancy expenses due to the
purchase of the office building in March 2000.
Income Taxes
There were no provisions for income tax for the three month periods ended
June 30, 2000 and 1999 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 31, 1999 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
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 August 4, 2000
BAP ACQUISITION CORP
by /s/ Garfield Ricketts by /s/ Una M. Ricketts
------------------------- ------------------------
Garfield Ricketts-President Una M. Ricketts-Secretary/Treasurer
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