<PAGE> 1
UNITED STATES
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition Period from to
---------------- ----------------
Commission file number 000-24057
Rushmore Financial Group, Inc.
---------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2375969
-------- ---------------
(State of Incorporation) (I. R. S. Employer Identification No.)
13355 Noel Road, Suite 650, Dallas, Texas 75240
-------------------------------------------------------------
972-450-6000
-----------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court.
Yes No
------ ------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 XXX No
----
State the number of shares outstanding of each of the issuer's classes
of common equity as of June 30, 2000: 3,978,013 shares of common stock, $0.01
par value.
Transitional Small Business Disclosure Format;
Yes No XXX
----
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Cash and cash equivalents $ 441,627 $ 490,401
Certificates of deposit 200,000 200,000
Amounts on deposit with reinsurer 4,741,120 4,645,073
Equity securities available for sale -- 50,000
------------ ------------
Total investments 5,382,747 5,385,474
------------ ------------
Deferred policy acquisition costs 11,117 25,700
Accounts receivable and due from reinsurers 717,993 848,961
Prepaid expenses and deposits 204,133 245,862
Equipment, net of accumulated depreciation 1,512,732 1,465,672
Goodwill 3,473,468 3,597,683
Other assets 106 229
------------ ------------
Total assets $ 11,302,296 $ 11,569,581
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 5,346 $ 5,100
Universal life contract liabilities 4,690,174 4,607,416
Notes payable 184,056 272,385
Due to reinsurers 127,156 83,537
Accrued expenses & other liabilities 558,262 606,176
------------ ------------
Total liabilities 5,564,994 5,574,614
------------ ------------
Shareholders' Equity:
Preferred stock-9% cumulative preferred stock, $10 par value, 2,000 shares
issued and outstanding at June 30, 2000 and December 31, 1999 20,000 20,000
Preferred stock-Series A cumulative preferred stock, $10 par value;
13,687 shares issued and outstanding at June 30, 2000 and
December 31, 1999 136,870 136,870
Preferred stock-Series B convertible cumulative preferred stock:
$10 par value; 13,520 shares issued and outstanding at June 30, 2000;
no shares issued and outstanding at December 31, 1999 135,200 --
Common stock-$0.01 par value, 10,000,000 shares authorized;
3,978,013 shares issued at June 30, 2000; 3,789,544 shares issued 39,780 37,895
at December 31, 1999
Common stock subscribed-no shares at June 30, 2000; 8,138 shares -- 81
at $0.01 at December 31, 1999
Additional paid in capital 10,204,756 9,851,128
Treasury stock-89,473 shares at cost (116,345) (116,345)
Accumulated deficit (4,682,959) (3,901,222)
Common and preferred stock subscriptions receivable -- (33,440)
------------ ------------
Total shareholders' equity 5,737,302 5,994,967
------------ ------------
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,302,296 $ 11,569,581
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 3
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months ended June 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Revenue from Insurance Services:
Insurance policy income $ 391,877 $ 290,782 $ 773,829 $ 419,095
Net investment income 74,177 94,064 152,843 187,055
Agency management fee 102,139 86,595 214,552 126,833
Gain on sale of insurance block -- -- -- 1,016,268
Revenue from Investment Services:
Commissions and fees 887,239 872,183 1,667,765 1,552,446
Asset management 699,090 73,431 1,382,248 139,053
Other 6,082 1,153 14,626 12,473
----------- ----------- ----------- -----------
Total revenues 2,160,604 1,418,208 4,205,863 3,453,223
----------- ----------- ----------- -----------
Expenses:
Insurance Services Expenses:
Other insurance services expenses 316,888 249,699 616,507 383,329
Policyholder benefits 78,196 110,806 166,013 178,906
Amortization of deferred policy
acquisition costs 27,644 23,451 63,455 116,315
Investment services expenses:
Commission expense 629,027 719,780 1,212,615 1,323,173
Other investment services expenses 151,560 80,394 351,635 124,133
General and administrative 1,288,371 854,519 2,583,948 1,566,303
----------- ----------- ----------- -----------
Total expenses 2,491,686 2,038,649 4,994,173 3,692,159
----------- ----------- ----------- -----------
Operating (loss) (331,082) (620,441) (788,310) (238,936)
Interest expense 7,401 3,760 19,191 3,931
----------- ----------- ----------- -----------
(Loss) before income taxes (338,483) (624,201) (807,501) (242,867)
Income tax expense (benefit) (5,107) (10,636) (25,764) 152,747
----------- ----------- ----------- -----------
Net (loss) $ (333,376) $ (613,565) $ (781,737) $ (395,614)
=========== =========== =========== ===========
Net (loss) applicable to common shareholders $ (341,405) $ (617,095) $ (793,296) $ (402,673)
=========== =========== =========== ===========
Basic and diluted:
Net (loss) per share of common stock,
after dividends on preferred stock $ (0.08) $ (0.20) $ (0.21) $ (0.13)
=========== =========== =========== ===========
Weighted average common shares outstanding 3,829,651 3,004,659 3,769,988 3,006,079
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (781,737) $ (395,614)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Gain on sale of insurance block net of federal income tax -- (806,637)
Realized gains (net) -- (3,933)
Depreciation and amortization 297,576 59,150
CHANGE IN ASSETS AND LIABILITIES, NET OF EFFECTS OF SALE OF
INSURANCE BLOCK IN 1999:
(Increase) decrease in assets:
Accounts receivable and due from reinsurers 130,968 (238,502)
Prepaid expenses and deposits 41,729 6,897
Deferred policy acquisition costs 14,583 37,638
Amounts on deposit with reinsurer (96,047) (162,688)
Other assets 924 --
Increase (decrease) in liabilities:
Accrued expenses and other liabilities (47,914) 63,108
Due to reinsurers 43,619 152,301
Future policy benefits 246 500
Universal Life liabilities 82,758 117,496
----------- -----------
Net cash flows used in operating activities (313,295) (1,170,284)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (221,222) (32,845)
Sale (purchase) of equity securities available for sale 50,000 (50,000)
Decrease in certificates of deposit -- 497,381
Sales of bonds available for sale -- 207,816
Cash received on sale of insurance block -- 500,000
----------- -----------
Net cash flows provided by (used in) investing activities (171,222) 1,122,352
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans to officers and affiliate -- 44,759
Proceeds from sale of Common Stock, net of offering costs 280,431 40,170
Proceeds from sale of Preferred Stock 255,200 --
Preferred Stock dividends paid (11,559) (7,059)
Payments on notes payable (88,329) (30,991)
Proceeds from notes payable -- 35,260
----------- -----------
Net cash flows provided by financing activities 435,743 82,139
----------- -----------
Change in cash and cash equivalents (48,774) 34,207
Cash and cash equivalents at beginning of period 490,401 613,814
----------- -----------
Cash and cash equivalents at end of period $ 441,627 $ 648,021
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 19,191 $ 4,582
Cash paid for income taxes $ -- $ --
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements included herein have been prepared by Rushmore
Financial Group, Inc. ("Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures contained herein are adequate to make the information
presented not misleading. In the opinion of management, the information
furnished in the unaudited consolidated financial statements reflects all
adjustments which are ordinary in nature and necessary to present fairly the
Company's financial position, results of operations and changes in financial
position for such interim period. These interim financial statements should be
read in conjunction with the Company's financial statements and the notes
thereto as of December 31, 1999, included in the Company's annual report on Form
10-KSB for the year ended December 31, 1999.
Rushmore Insurance Services, Incorporated ("Rushmore Agency") is an insurance
agency and an affiliate of the Company by means of service agreements. The
Company has entered into an administrative services agreement whereby net
revenues and expenses are charged via a management fee to the Company. Rushmore
Agency has been consolidated in the accompanying consolidated financial
statements.
2. Industry Segment Information
The following summarizes the Company's identifiable assets by industry segment
as of June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Insurance Agency $ 244,765 $ 555,263
Insurance Company 5,102,627 5,815,389
Securities Brokerage 1,412,090 296,951
Advisory Services 3,713,878 --
Corporate 828,936 629,231
------------ -----------
Total $ 11,302,296 $ 7,296,834
------------ -----------
</TABLE>
The following summarizes the Company's operating income (loss) by industry
segment for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Insurance Agency $ 101,804 $ (10,071) $ 191,805 $ (125,816)
Insurance Company (18,229) (28,832) (35,001) 768,148
Securities Brokerage (137,334) (154,962) (329,121) (214,240)
Advisory Services 74,362 (28,899) 204,895 (61,005)
Corporate (353,979) (390,801) (814,315) (762,701)
---------- ---------- ---------- ----------
Total $ (333,376) $ (613,565) $ (781,737) $ (395,614)
---------- ---------- ---------- ----------
</TABLE>
3. Related Party Transactions
In July 1999 the Company acquired via merger 100% of the stock of The John Vann
Company ("Vann Company"), a Texas corporation engaged in business as a
registered investment advisor. In June 2000, the Company entered into an
agreement with a former shareholder of Vann Company, Mr. John Vann ("Vann")
whereby Rushmore Investment Advisors ("RIA") may become a separate independent
entity to be headed by Vann no later than March 31, 2001. Depending on the price
of the Company's common stock, the Company may effectuate a tax-free spin-off of
RIA giving shareholders of the Company shares in the separate RIA, or the
Company will exchange 100% of the shares of RIA for Vann's shares of the
Company.
In May the Company entered into an agreement with Spectrum Insurance, Inc.,
involving capital investments the Company's common stock, technology assistance,
and cross-marketing of insurance products between the
5
<PAGE> 6
companies. As part of the new relationship, Spectrum intends to make a series of
capital investments in Rushmore. The Company intends to use these investments
for the development and rollout of its on-line trading system software. In
addition to the cash investment, technical assistance in the development of this
software will be provided by Spectrum's parent company, WinkWorx, an
Illinois-based Internet technology incubator.
4. Comprehensive Income (Loss)
Comprehensive income (loss) for the periods ending June 30, 2000 and 1999
consists of:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net (loss) $ (333,376) $ (613,565) $ (781,737) $ (395,614)
Other comprehensive (loss), net of tax
Unrealized (losses) on securities,
net of reclassification adjustment -- -- -- (758)
----------- ----------- ------------ -----------
Comprehensive (loss) $ (333,376) $ (613,565) $ (781,737) $ (396,372)
----------- ----------- ------------ -----------
</TABLE>
5. Earnings (Loss) Per Share
Earnings (loss) per share for the periods ending June 30, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net (loss) $ (333,376) $ (613,565) $ (781,737) $ (395,614)
Less dividends on preferred stock (8,029) (3,530) (11,559) (7,059)
----------- ----------- ----------- -----------
Net (loss) applicable to
common shareholders $ (341,405) $ (617,095) $ (793,296) $ (402,673)
=========== =========== =========== ===========
Weighted average common
shares outstanding 3,829,651 3,004,659 3,769,988 3,006,079
Dilutive Potential Common Shares -- -- -- --
Net (loss) per common share
Basic $ (0.08) $ (0.20) $ (0.21) $ (0.13)
Diluted $ (0.08) $ (0.20) $ (0.21) $ (0.13)
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended June 30, 2000 and 1999
Revenues
The following table sets forth the components of the Company's revenues for the
periods indicated:
6
<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
----------- -----------
<S> <C> <C>
Insurance Agency $ 474,888 $ 336,785
Insurance Company 93,305 134,656
Securities Brokerage 887,239 872,183
Advisory Services 699,090 73,431
Corporate 6,082 1,153
----------- -----------
Total $ 2,160,604 $ 1,418,208
----------- -----------
</TABLE>
Total revenue increased $742,396, or 52%, from 1999 to 2000. This increase was
comprised primarily of $138,103 from insurance agency operations, and $625,659
from investment advisory operations.
The increase in insurance agency revenue was generally the result of increases
of $79,514 in RushQuote internet-based insurance sales, $43,045 in other life
and health insurance product sales, and $29,385 in Health Association management
fees.
The decline of $41,351 in insurance company revenue was composed of both a
decrease in policy premium income of $21,464 and a decrease in policy investment
revenue of $19,887.
The increase of $15,056 in securities brokerage revenue consisted mainly of
decreases of $65,007 in brokerage commission revenue and $75,233 in variable
insurance and annuity commissions, offset by an increase of $156,213 in
RushTrade on-line brokerage revenue.
In July 1999 the Company acquired 100% of the stock of The John Vann Company, an
investment management firm. The increase in advisory services revenue is
attributable to fees generated by this acquisition.
Expenses
The following table sets forth the components of the Company's expenses for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
------------ -----------
<S> <C> <C>
Insurance Agency $ 373,084 $ 346,856
Insurance Company 116,641 174,124
Securities Brokerage 1,024,573 1,027,026
Advisory Services 624,728 102,330
Corporate 352,660 388,313
------------ -----------
Total $ 2,491,686 $ 2,038,649
------------ -----------
</TABLE>
Total expenses increased $453,037, or 22%, from 1999 to 2000. The insurance
agency and the investment advisor recorded expense increases. The insurance
company and the securities brokerage division had expense decreases.
Insurance Agency expenses increased $26,228, or 8%, from 1999 to 2000.
Commission expense rose from $174,432 to $298,945 primarily as a result of a
$51,655 increase in RushQuote commissions and a $72,858 increase in other life
and health product commissions. The rise in RushQuote commissions reflects the
emphasis on increasing variable compensation and decreasing fixed salaries.
Management's decision to decrease the volume of leads provided to agents
resulted in a lead expense decrease from $34,358 to $3,142. General and
administrative expenses decreased $67,069, with the primary reductions being in
the categories of postage, printing, office rent, and payroll costs.
Insurance Company expense decreased $57,483, or 33%, from 1999 to 2000. The main
decreases were comprised of $32,610 in insurance policy benefits and $26,943 in
general operating expenses.
Securities Brokerage expenses decreased $2,453, or 1%, from 1999 to 2000.
Commission expense decreased from $667,444 to $545,247, generally as the result
of a decrease in commission revenue. Increased RushTrade operating
7
<PAGE> 8
expenses primarily caused increases of $31,618 in payroll expenses, $23,024 in
quotation service costs, and depreciation expense of $48,861.
Advisory Services expenses rose $522,398, or 511%, from 1999 to 2000, primarily
as a result of the operating costs associated with the John Vann acquisition.
Commissions rose from $52,336 to $83,780, and quotation and transactional
expense rose from $3,925 to $42,979. Depreciation and goodwill amortization rose
$73,462, and office rent rose $58,297. Compensation expense rose from $27,348 to
$183,022. Travel expenses associated with business development rose from $2,061
to $39,181.
Corporate expenses decreased $39,413, or 10%, from 1999 to 2000. Marketing
expenses decreased from $38,334 to $692, and legal and professional fees
decreased from $79,637 to $53,625. Other categories of decrease include printing
and travel and entertainment. Insurance costs and payroll-related expenses
recorded slight increases.
Operating income (loss)
The following table sets forth the components of the Company's net income (loss)
for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
------------ -----------
<S> <C> <C>
Insurance Agency $ 101,804 $ (10,071)
Insurance Company (18,229) (28,832)
Securities Brokerage (137,334) (154,962)
Advisory Services 74,362 (28,899)
Corporate (353,979) (390,801)
------------ -----------
Total $ (333,376) $ (613,565)
------------ -----------
</TABLE>
The Company had a net loss of $333,376 in 2000, a decrease of 46% from the 1999
net loss of $613,565. Every operating division either had net operating income
or reduced its net operating loss. The net loss applicable to common
shareholders for the second quarter of 2000 was ($0.08) per share (basic and
diluted). The net loss applicable to common shareholders for the second quarter
of 1999 was ($0.20) per share (basic and diluted).
Six Months Ended June 30, 2000 and 1999
Revenues
The following table sets forth the components of the Company's revenues for the
periods indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
----------- -----------
<S> <C> <C>
Insurance Agency $ 940,564 $ 478,386
Insurance Company 200,660 1,270,865
Securities Brokerage 1,667,765 1,552,176
Advisory Services 1,382,248 139,323
Corporate 14,626 12,473
----------- -----------
Total $ 4,205,863 $ 3,453,223
----------- -----------
</TABLE>
Total revenue increased $752,640, or 22%, from 1999 to 2000. A major component
of 1999 revenue was the pre-tax gain of $1,016,268 recorded on the sale of a
block of insurance policies to Conseco Life Insurance. Excluding that revenue
item, all other revenue increased $1,768,908, or 73%.
Insurance agency revenue increased $462,178, or 97%, from 1999 to 2000. This
increase is generally attributable to increases of $119,587 in RushQuote
internet-based insurance sales, $254,813 in other life and health insurance
product sales, and $85,714 in Health Association management fees.
The decline of $1,070,205 in insurance company revenue was primarily caused by
the 1999 gain of $1,016,268 on the insurance block sale to Conseco. Excluding
this item, revenue
8
<PAGE> 9
decreased $53,937, or 21%, from 1999 to 2000. This decrease was composed of a
decrease in policy premium income of $19,725 and a decrease in policy investment
revenue of $34,212.
Securities brokerage revenue increased $115,589, or 7%, from 1999 to 2000. The
increases were composed of $139,957 in brokerage revenue and $262,246 in
RushTrade revenue. These were offset to a large extent by decreases of $202,139
in variable life and annuity revenue, $28,401 in mutual fund commissions and
$26,126 in asset-based 12-b-1 fees.
Investment advisory revenue rose $1,242,925, or 892%, from 1999 to 2000. This
increase in advisory services revenue is attributable to fees generated by the
John Vann acquisition in July 1999.
Expenses
The following table sets forth the components of the Company's expenses for the
periods indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
----------- -----------
<S> <C> <C>
Insurance Agency $ 748,759 $ 604,202
Insurance Company 261,425 349,970
Securities Brokerage 1,996,886 1,766,297
Advisory Services 1,177,353 200,328
Corporate 809,750 771,362
----------- -----------
Total $ 4,994,173 $ 3,692,159
----------- -----------
</TABLE>
Total expenses increased $1,302,014, or 35%, from 1999 to 2000. Of this
increase, $977,025, or 75%, is due primarily to the operating expenses of the
investment advisory firm acquired by merger in July 1999.
Insurance Agency expenses increased $144,557, or 24%, from 1999 to 2000.
Commission expense rose from $224,818 to $559,087 primarily as a result of a
$53,839 increase in RushQuote commissions and a $280,430 increase in other life
and health product commissions. Sales lead expense decreased from $85,490 to
$15,279. General and administrative expenses decreased $119,501, with the
primary reductions consisting of $19,532 in postage expense, $32,866 in printing
costs, $21,328 in office rent, and $28,304 in payroll costs.
Insurance Company expense decreased $88,545, or 25%, from 1999 to 2000. The main
decreases were comprised of $12,893 in insurance policy benefits, $52,860 in
acquisition costs, and $18,028 in general operating expenses.
Securities Brokerage expenses increased $230,589, or 13%, from 1999 to 2000.
Commission expense decreased from $1,223,237 to $1,036,808, generally as the
result of lower securities revenue combined with a lower average commission
payout rate. Increased RushTrade operating expenses primarily caused increases
of $112,488 in payroll expenses, $79,717 in quotation service costs, and
depreciation expense of $93,745. Legal and professional fees increased $61,552
primarily due to paying a settlement of $54,000 in June.
Advisory Services expenses rose $977,025, or 488%, from 1999 to 2000, primarily
as a result of the staffing, administrative, and operating costs associated with
the John Vann acquisition in July 1999. Commissions rose from $99,936 to
$175,807, and quotation and transactional expense rose from $4,613 to $123,778.
Depreciation and goodwill amortization rose $145,962, and office rent rose
$79,062. Compensation-related expense rose from $66,900 to $350,119. Travel
expenses associated with business development rose from $5,354 to $70,736, legal
and professional fees rose from $673 to $53,046, and marketing expenses rose
from $418 to $25,465.
Operating income (loss)
The following table sets forth the components of the Company's net income (loss)
for the periods indicated:
9
<PAGE> 10
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
----------- -----------
<S> <C> <C>
Insurance Agency $ 191,805 $ (125,816)
Insurance Company (35,001) 768,148
Securities Brokerage (329,121) (214,240)
Advisory Services 204,895 (61,005)
Corporate (814,315) (762,701)
----------- -----------
Total $ (781,737) $ (395,614)
----------- -----------
</TABLE>
The Company had a net loss of $781,737 in 2000, or 198% of the 1999 net loss of
$395,614. However, the net loss for 1999 contained the after-tax gain of
$806,637 recorded on the Conseco insurance block sale. Excluding this amount,
the net loss in 1999 would have been $1,202,251, and the net loss for 2000 would
then have been 65% of the comparable amount for 1999. The net loss applicable to
common shareholders for the first six months of 2000 was ($0.21) per share
(basic and diluted). The net loss applicable to common shareholders for the
first six months of 1999 was ($0.13) per share (basic and diluted). Excluding
the Conseco gain, the net loss applicable to common shareholders for 1999 would
have been ($0.40) per share (basic and diluted).
Liquidity
The Company's requirements for normal cash expenditures will continue to be met
through cash flow from operations. Additional costs to further develop the
proprietary software to be used in the Company's on-line trading division,
RushTrade.com, are expected to continue to be funded by additional capital
raised through the private placement of convertible preferred stock and common
stock.
Forward looking statements
This document includes statements that may constitute "forward-looking"
statements, usually containing the words "believe", "estimate", "project",
"expect", or similar expressions. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but are not
limited to, continued acceptance of the Company's products in the marketplace,
competitive factors, changes in regulatory environments, and other risks
detailed in the Company's periodic report filings with the Securities and
Exchange Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this filing.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither Rushmore Financial Group, Inc. nor its subsidiaries is a party to any
pending legal proceedings which management believes would have a material effect
upon the operations or financial condition of Rushmore Financial Group, Inc.
The Company's brokerage subsidiary, Rushmore Securities Corporation, has had
claims made against it by three customers in Florida resulting from investments
in financial instruments placed through Rushmore Securities Corporation in a
company that declared bankruptcy and in a company that has failed to make
payments on its debt obligations. The first claim for $257,000 resulted in an
arbitration award for $50,000, which the Company paid in 1999. Other threatened
claims totaling $382,000 have not been filed.
On November 3, 1999, a former employee of Rushmore Securities Corporation and
former director of the Company filed suit in the District Courts of Dallas
County, Texas, alleging breach of contract arising out of his termination by the
Company and requesting damages in excess of $389,000. This dispute was settled
for $20,000 in June.
Item 2. Defaults Upon Senior Securities - None
Item 3. Submission of Matters to a Vote of Security Holders
Information concerning the Company's annual meeting of shareholders held on May
5, 2000 was disclosed in the Company's Form 10-QSB for the quarter ended March
31, 2000 and is incorporated by reference.
Item 4. Exhibits and Reports on Form 8K
(a) Exhibits. Exhibit 10.17 - Vann Agreement
Exhibit 10.18 - Spectrum Agreement
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8k. - None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rushmore Financial Group, Inc.
Dated: August 10, 2000 By /s/ Howard M. Stein
---------------------------------------
By Howard M. Stein
Controller
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------- -----------
<S> <C>
10.17 Vann Agreement
10.18 Spectrum Agreement
27 Financial Data Schedule
</TABLE>
