<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 September 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 September 30, 2000: 4,644,253 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
2
<PAGE> 3
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
Investments:
Cash and cash equivalents $ 2,108,901 $ 490,401
Certificates of deposit 100,000 200,000
Amounts on deposit with reinsurer 4,824,981 4,645,073
Equity securities available for sale -- 50,000
-------------- --------------
Total investments 7,033,882 5,385,474
-------------- --------------
Deferred policy acquisition costs 5,014 25,700
Accounts receivable and due from reinsurers 607,452 848,961
Prepaid expenses and deposits 331,034 245,862
Equipment, net of accumulated depreciation 887,347 1,465,672
Goodwill, net of accumulated amortization 3,411,338 3,597,683
Other assets 53 229
-------------- --------------
Total assets $ 12,276,120 $ 11,569,581
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 5,630 $ 5,100
Universal life contract liabilities 4,782,278 4,607,416
Notes payable 265,793 272,385
Due to reinsurers 119,885 83,537
Accrued expenses & other liabilities 463,470 606,176
-------------- --------------
Total liabilities 5,637,056 5,574,614
-------------- --------------
Shareholders' Equity:
Preferred stock-9% cumulative preferred stock, $10 par value, 2,000 shares
issued and outstanding at September 30, 2000 and December 31, 1999 20,000 20,000
Preferred stock-Series A cumulative preferred stock, $10 par value;
12,063 shares issued and outstanding at September 30, 2000;
13,687 shares issued and outstanding at December 31, 1999 120,630 136,870
Preferred stock-Series B convertible cumulative preferred stock: $10 par value;
13,520 shares issued and outstanding at September 30, 2000;
no shares issued and outstanding at December 31, 1999 135,200 --
Common stock-$0.01 par value, 10,000,000 shares authorized;
4,644,253 shares issued at September 30, 2000; 3,789,544 shares 46,443 37,895
issued at December 31, 1999
Common stock subscribed-no shares at September 30, 2000; -- 81
8,138 shares at $0.01 at December 31, 1999
Additional paid in capital 10,926,372 9,851,128
Treasury stock-89,473 shares at cost (116,345) (116,345)
Accumulated deficit (4,493,236) (3,901,222)
Common and preferred stock subscriptions receivable -- (33,440)
-------------- --------------
Total shareholders' equity 6,639,064 5,994,967
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,276,120 $ 11,569,581
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue:
Revenue from Insurance Services:
Insurance policy income $ 279,689 $ 349,202 $ 1,053,518 $ 768,297
Net investment income 69,255 79,240 222,098 266,295
Agency management fee 92,933 96,981 307,485 223,814
Gain on sale of insurance block -- -- -- 1,016,268
Revenue from Investment Services:
Commissions and fees 522,869 664,046 2,190,634 2,216,492
Asset management 655,350 738,988 2,037,598 878,041
Gain on sale of securities software 772,333 -- 772,333 --
Other 9,284 1,979 23,910 14,452
-------------- -------------- -------------- --------------
Total revenues 2,401,713 1,930,436 6,607,576 5,383,659
-------------- -------------- -------------- --------------
Expenses:
Insurance Services Expenses:
Other insurance services expenses 205,192 278,028 821,699 661,357
Policyholder benefits 87,431 66,482 253,444 245,388
Amortization of deferred policy
acquisition costs 19,615 30,552 83,070 146,867
Investment services expenses:
Commission expense 346,732 625,529 1,559,347 1,948,702
Other investment services expenses 137,673 84,170 489,308 208,303
General and administrative 1,404,612 998,935 3,988,560 2,565,238
-------------- -------------- -------------- --------------
Total expenses 2,201,255 2,083,696 7,195,428 5,775,855
-------------- -------------- -------------- --------------
Operating income (loss) 200,458 (153,260) (587,852) (392,196)
Interest expense 7,327 5,366 26,518 9,297
-------------- -------------- -------------- --------------
Income (loss) before income taxes 193,131 (158,626) (614,370) (401,493)
Income tax expense (benefit) 3,408 (20,801) (22,356) 131,946
-------------- -------------- -------------- --------------
Net income (loss) $ 189,723 $ (137,825) $ (592,014) $ (533,439)
============== ============== ============== ==============
Net income (loss) applicable to common
shareholders $ 179,682 $ (141,355) $ (613,614) $ (544,028)
============== ============== ============== ==============
Basic:
Net income (loss) per share of common stock,
after dividends on preferred stock $ 0.04 $ (0.04) $ (0.15) $ (0.17)
============== ============== ============== ==============
Weighted average common shares outstanding 4,121,447 3,374,324 3,887,141 3,126,330
============== ============== ============== ==============
Diluted:
Net income (loss) per share of common stock,
after dividends on preferred stock $ 0.04 $ (0.04) $ (0.15) $ (0.17)
============== ============== ============== ==============
Weighted average common shares outstanding 4,121,447 3,374,324 3,887,141 3,126,330
============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (592,014) $ (533,439)
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)
Gain on sale of computer software (772,333) --
Realized gains (net) -- (3,933)
Depreciation and amortization 457,968 154,699
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 241,509 (425,078)
Prepaid expenses and deposits (85,172) 11,955
Deferred policy acquisition costs 20,686 47,303
Amounts on deposit with reinsurer (179,908) (232,125)
Other assets 2,777 (59,351)
Increase (decrease) in liabilities:
Accrued expenses and other liabilities (142,706) 27,646
Due to reinsurers 36,348 151,153
Future policy benefits 530 499
Universal Life liabilities 174,862 182,745
-------------- --------------
Net cash used in operating activities (837,453) (1,484,563)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (423,566) (55,423)
Cash received on sale of computer software 1,500,000 --
Sale (purchase) of equity securities available for sale 50,000 (50,000)
Decrease in certificates of deposit 100,000 1,001,284
Sales of bonds available for sale -- 207,816
Cash received on purchase of John Vann Co -- 14,355
Cash received on sale of insurance block -- 500,000
-------------- --------------
Net cash provided by investing activities 1,226,434 1,618,032
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans to officers and affiliate -- 14,759
Proceeds from sale of Common Stock, net of offering costs 1,138,751 36,958
Proceeds from sale of Preferred Stock 135,200 --
Redemption of Preferred Stock (16,240) --
Preferred Stock dividends paid (21,600) (10,589)
Payments on notes payable (138,035) (32,150)
Proceeds from notes payable 131,443 500,000
-------------- --------------
Net cash provided by financing activities 1,229,519 508,978
-------------- --------------
Change in cash and cash equivalents 1,618,500 642,447
Cash and cash equivalents at beginning of period 490,401 613,814
-------------- --------------
Cash and cash equivalents at end of period $ 2,108,901 $ 1,256,261
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 26,518 $ 9,948
Cash paid for income taxes $ -- $ --
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
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 September 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Insurance Agency $ 201,886 $ 662,698
Insurance Company 5,178,814 5,156,639
Securities Brokerage 2,864,306 388,095
Advisory Services 3,650,075 3,458,853
Corporate 381,039 1,568,277
------------ ------------
Total $ 12,276,120 $ 11,234,562
------------ ------------
</TABLE>
The following summarizes the Company's operating income (loss) by industry
segment for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Insurance Agency $ 56,615 $ 24,469 $ 248,420 $ (101,347)
Insurance Company (7,681) 9,299 (42,682) 777,447
Securities Brokerage 531,493 (131,323) 202,372 (345,563)
Advisory Services (125,519) 272,024 79,376 211,019
Corporate (265,185) (312,294) (1,079,500) (1,074,995)
-------------- -------------- -------------- --------------
Total $ 189,723 $ (137,825) $ (592,014) $ (533,439)
-------------- -------------- -------------- --------------
</TABLE>
3. Related Party Transactions
In October 2000 the Company entered into an agreement with Community Bankers
Insurance Agency, LLC (CBIA) to provide RushTrade.com's online brokerage
services to customers of the member banks of Pacific Coast Bankers Bank (PCBB)
(an affiliate of CBIA). PCBB is a 232-member bank association with banks in
California, Alaska, Arizona, Hawaii, Nevada, Oregon, and Washington. In August
2000 several individuals affiliated with PCBB and CBIA purchased a total of
600,000 shares of the Company's common stock, and received warrants for an
additional 625,000 shares of the Company's common stock.
6
<PAGE> 7
4. Comprehensive Income (Loss)
Comprehensive income (loss) for the periods ending September 30, 2000 and 1999
consists of:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 189,723 $ (137,825) $ (592,014) $ (533,439)
Other comprehensive (loss),
net of tax
Unrealized (losses)
on securities, net of
reclassification adjustment -- -- -- (758)
-------------- -------------- -------------- --------------
Comprehensive income (loss) $ 189,723 $ (137,825) $ (592,014) $ (534,197)
-------------- -------------- -------------- --------------
</TABLE>
5. Earnings (Loss) Per Share
Earnings (loss) per share for the periods ending September 30, 2000 and 1999 are
as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 189,723 $ (137,825) $ (592,014) $ (533,439)
Less dividends on preferred stock (10,041) (3,530) (21,600) (10,589)
-------------- -------------- -------------- --------------
Net income (loss) applicable to
common shareholders $ 179,682 $ (141,355) $ (613,614) $ (544,028)
============== ============== ============== ==============
Weighted average common
shares outstanding 4,121,447 3,374,324 3,887,141 3,126,330
Dilutive Potential Common Shares -- -- -- --
Net (loss) per common share
Basic $ 0.04 $ (0.04) $ (0.15) $ (0.17)
Diluted $ 0.04 $ (0.04) $ (0.15) $ (0.17)
</TABLE>
6. Sale of Software
In September 2000 the Company sold to MV Technologies LLC the software program
purchased in October 1999 from Block Trading , Inc. The Company received back a
perpetual license regarding certain rights regarding the software. The sales
price was $1,500,000 cash, and the profit recorded on the sale was $772,333.
7. Preferred Stock Sale
In January 2000 the Company issued a Private Placement Memorandum offering for
sale its Series B Convertible Preferred Stock. This Memorandum offered up to
$10,000,000 of stock, par value $10 per share, at an issue price of $25 per
share. The shares have a 9% cumulative dividend, payable quarterly in cash, and
are convertible into common stock at a rate of 70% of the market price at the
time of conversion, but not less than $4.00 per share of common stock. For each
share of Series B stock, each investor will receive a callable warrant which
entitles the holder to purchase a share of common stock at a price of $7.00 per
share for a period of two years.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended September 30, 2000 and 1999
Revenues
7
<PAGE> 8
The following table sets forth the components of the Company's revenues for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999
-------------- --------------
<S> <C> <C>
Insurance Agency $ 335,010 $ 419,944
Insurance Company 106,867 105,479
Securities Brokerage 1,295,202 663,393
Advisory Services 655,350 739,641
Corporate 9,284 1,979
-------------- --------------
Total $ 2,401,713 $ 1,930,436
-------------- --------------
</TABLE>
Total revenue increased $471,277, or 24%, from 1999 to 2000. This increase was
comprised primarily of $772,333 recorded as gain on the sale of the Block
Trading software purchased in 1999, offset by decreases in revenue of $84,934
from insurance agency operations, and $84,291 from investment advisory
operations.
The decrease in insurance agency revenue was generally the result of decreases
of $30,595 in RushQuote internet-based insurance sales, $44,704 in other life
and health insurance product sales, and $11,329 in interest on sales agent
financing, offset by an increase of $7,999 in Health Association management
fees.
The increase of $631,809 in securities brokerage revenue consisted mainly of an
increase of $58,079 in RushTrade on-line brokerage revenue and the gain of
$772,333 recorded on the sale of the Block Trading software purchased in 1999
for $800,000, offset by decreases of $65,710 in brokerage commission revenue and
$183,032 in variable insurance and annuity commissions.
The decrease of $84,291 in advisory services revenue is generally the result of
lower assets under management in 2000 than in 1999. Assets have declined
generally due to lower stock market prices, and since fee revenue is based on a
percentage of those assets, fee revenue has decreased.
Expenses
The following table sets forth the components of the Company's expenses for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999
-------------- --------------
<S> <C> <C>
Insurance Agency $ 278,395 $ 395,475
Insurance Company 111,140 116,981
Securities Brokerage 763,709 794,716
Advisory Services 780,869 463,474
Corporate 267,142 313,050
-------------- --------------
Total $ 2,201,255 $ 2,083,696
-------------- --------------
</TABLE>
Total expenses increased $117,559, or 6%, from 1999 to 2000. The insurance
agency, corporate division, and the securities brokerage division recorded
expense decreases. The advisory services division recorded an expense increase.
Insurance Agency expenses decreased $117,080, or 30%, from 1999 to 2000.
Commission expense decreased from $217,882 to $196,177 primarily as a result of
a $42,225 decrease in other life and health product commissions, offset by a
$13,576 increase in RushQuote commissions. Expense for sales leads decreased by
$31,795. General and administrative expenses decreased $63,580, with the primary
reductions being in the categories of telephone, office rent, insurance, and
payroll costs.
Securities Brokerage expenses decreased $31,007, or 4%, from 1999 to 2000.
Commission expense decreased from $517,584 to $311,123, generally as the result
of a decrease in commission revenue. Increased RushTrade operating expenses
primarily caused increases of $28,068 in payroll expenses, $32,491 in quotation
service cost, $56,888 in advertising expense, and depreciation expense of
$51,968.
Advisory Services expenses rose $317,395, or 68%, from 1999 to 2000. Commissions
decreased $72,336, while legal and professional fees rose $75,413. Office rent
rose $45,983 due to office relocation in July 2000. Payroll
8
<PAGE> 9
costs increased $159,406, and quotation and transactional expense rose $16,419.
Travel expenses associated with business development rose $35,964.
Corporate expenses decreased $45,908, or 15%, from 1999 to 2000. Decreases in
payroll-related expenses of $49,589, travel of $11,954, and postage of $6,556
were offset to some degree by an increase in printing costs of $10,277 and
insurance costs of $19,289.
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 September 30,
2000 1999
------------- -------------
<S> <C> <C>
Insurance Agency $ 56,615 $ 24,469
Insurance Company (7,681) 9,299
Securities Brokerage 531,493 (131,323)
Advisory Services (125,519) 272,024
Corporate (265,185) (312,294)
------------- -------------
Total $ 189,723 $ (137,825)
------------- -------------
</TABLE>
The Company had net income of $189,723 in 2000, an increase of $327,548 over the
1999 net loss of $137,825. The net income applicable to common shareholders for
the third quarter of 2000 was $0.04 per share (basic and diluted). The net loss
applicable to common shareholders for the third quarter of 1999 was ($0.04) per
share (basic and diluted).
Nine Months Ended September 30, 2000 and 1999
Revenues
The following table sets forth the components of the Company's revenues for the
periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Insurance Agency $ 1,275,574 $ 898,330
Insurance Company 307,527 1,376,344
Securities Brokerage 2,962,967 2,215,569
Advisory Services 2,037,598 878,964
Corporate 23,910 14,452
----------- -----------
Total $ 6,607,576 $ 5,383,659
----------- -----------
</TABLE>
Total revenue increased $1,223,917, or 23%, 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 life insurance policies to Conseco Life Insurance. A major component of
2000 revenue was the gain of $772,333 recorded on the sale of Block Trading
software. Excluding these revenue items, all other revenue increased $1,467,852,
or 34%.
Insurance agency revenue increased $377,244, or 42%, from 1999 to 2000. This
increase is generally attributable to increases of $88,992 in RushQuote
internet-based insurance sales, $204,249 in other life and health insurance
product sales, and $93,708 in Health Association management fees.
The decline of $1,068,817 in insurance company revenue was primarily caused by
the 1999 gain of $1,016,268 on insurance block sale to Conseco. Excluding this
item, revenue decreased $52,549, or 15%, from 1999 to 2000.
Securities brokerage revenue increased $747,398, or 34%, from 1999 to 2000. The
increases were composed of $121,434 in brokerage revenue and $334,892 in
RushTrade revenue. These were offset to a large extent by decreases of $353,071
in variable life and annuity revenue, $37,060 in mutual fund commissions and
$56,613 in asset-based 12-b-1 fees. A major component of 2000 revenue was the
gain of $772,333 recorded on the Block Trading software. Excluding this item,
revenue declined $24,935, or 1%, from 1999 to 2000.
9
<PAGE> 10
Investment advisory revenue rose $1,158,634, or 132%, 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>
Nine Months Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Insurance Agency $ 1,027,154 $ 999,677
Insurance Company 372,565 466,951
Securities Brokerage 2,760,595 2,561,013
Advisory Services 1,958,222 663,802
Corporate 1,076,892 1,084,412
------------ ------------
Total $ 7,195,428 $ 5,775,855
------------ ------------
</TABLE>
Total expenses increased $1,419,573, or 25%, from 1999 to 2000. Of this
increase, $1,294,420, or 91%, is due primarily to the operating expenses of the
investment advisory firm acquired by merger in July 1999.
Insurance Agency expenses increased $27,477, or 3%, from 1999 to 2000.
Commission expense rose from $442,700 to $755,264 primarily as a result of a
$67,415 increase in RushQuote commissions and a $245,149 increase in other life
and health product commissions. Sales lead expense decreased from $118,657 to
$16,651. General and administrative expenses decreased $183,081, with primary
reductions of $21,378 in postage expense, $31,384 in printing costs, $31,916 in
office rent, $21,071 in insurance expense, and $62,737 in payroll costs.
Insurance Company expense decreased $94,386, or 20%, from 1999 to 2000. The main
decreases were comprised of $55,741 in insurance policy costs and benefits and
$38,645 in general operating expenses.
Securities Brokerage expenses increased $199,582 or 8%, from 1999 to 2000.
Commission expense decreased from $1,740,821 to $1,347,931, generally as the
result of lower securities revenue combined with a lower average commission
payout rate. Legal and professional fees increased $54,624, and were generally
related to settlement expenses. Increased RushTrade operating expenses primarily
caused increases of $140,556 in payroll expenses, $112,208 in quotation service
cost, $145,713 in depreciation expense, and $112,871 in advertising expenses.
Advisory Services expenses rose $1,294,420, or 195%, from 1999 to 2000,
primarily as a result of the staffing, administrative, and operating costs
associated with the John Vann acquisition in July 1999. Expenses increased in
the following categories: $135,584 in quotation and transactional fees, $153,576
in depreciation and goodwill amortization, $125,045 in office rent, $445,780 in
compensation-related expenses, $101,346 in travel expenses, and $127,786 in
legal and professional fees.
Operating income (loss)
The following table sets forth the components of the Company's net income (loss)
for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Insurance Agency $ 248,420 $ (101,347)
Insurance Company (42,682) 777,447
Securities Brokerage 202,372 (345,563)
Advisory Services 79,376 211,019
Corporate (1,079,500) (1,074,995)
------------ ------------
Total $ (592,014) $ (533,439)
------------ ------------
</TABLE>
10
<PAGE> 11
The Company had a net loss of $592,014 in 2000, an 11% increase from the 1999
net loss of $533,439. The net loss applicable to common shareholders for the
first nine months of 2000 was ($0.15) per share (basic and diluted). The net
loss applicable to common shareholders for the first nine months of 1999 was
($0.17) per share (basic and diluted). The net loss for 1999 contained the
after-tax gain of $806,637 recorded on the Conseco insurance block sale, and the
net loss for 2000 included the gain of $772,333 recorded on the sale of the
Block Trading software. Excluding these amounts, the net loss in 1999 would have
been $1,340,076, and the net loss for 2000 would have been $1,364,347. Excluding
these two gains, the net loss applicable to common shareholders for 2000 would
have been ($0.35) per share (basic and diluted), and the net loss applicable to
common shareholders for 1999 would have been ($0.43) per share (basic and
diluted).
Liquidity
The Company's requirements for normal cash expenditures are expected 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.
11
<PAGE> 12
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. A claim for $257,000 resulted in an
arbitration settlement of $50,000, which the Company paid in 1999, and the
Company is currently negotiating with claimant's attorney regarding legal fees,
but the amount of any potential expense cannot be determined as of the date of
this document.
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 10.19 - MVT Indemnity Agreement
Exhibit 10.20 - MVT Andover Agreement
Exhibit 10.21 - MVT Software Assignment and
License 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: November 13, 2000 By /s/ Howard M. Stein
------------------------------
By Howard M. Stein
Controller
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.19 MVT Indemnity Agreement
10.20 MVT Andover Agreement
10.21 MVT Software Assignment and License Agreement
27 Financial Data Schedule
</TABLE>
