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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from to
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Commission File Number 0-20272
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RESOURCE CAPITAL GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3617377
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
419 Crossville Road, Suite 204 Roswell, GA 30075
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(Address of principal executive offices) (Zip Code)
770-649-7000
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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. [X] Yes [ ] No
As of September 30, 2000, 416,310 shares of common stock of the
Registrant were outstanding.
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INDEX
RESOURCE CAPITAL GROUP, INC.
<TABLE>
<CAPTION>
Page
Part I. Financial Information Number
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<S> <C> <C>
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet-September 30, 2000
and December 31, 1999 3
Consolidated Statement of Operations-For the
Three Months and Nine Months Ended
September 30, 2000 and 1999 4
Consolidated Statement of Cash Flows-For the
Nine Months Ended September 30, 2000
and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
a) Consolidated Balance Sheet
RESOURCE CAPITAL GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
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(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 530,367 $ 593,863
Real and personal property, at cost
Land 3,722,895 3,721,554
Buildings and improvements 8,716,184 8,404,536
Furniture and equipment 525,922 472,255
Construction in progress 297,771 37,493
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13,262,772 12,635,838
Less accumulated depreciation (819,273) (583,918)
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Net real and personal property 12,443,499 12,051,920
Deferred tax asset 111,764 19,720
Deferred charges-net of accumulated amortization 212,446 223,339
Other assets 308,353 150,831
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$ 13,606,429 $ 13,039,673
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 187,364 $ 86,440
Accrued expenses
Interest 50,271 52,716
Payroll 15,328 122,418
Professional fees 25,000 26,000
Property taxes 97,897
Income taxes 145,919
Other 750 18,070
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189,246 365,123
Security deposits and other 116,043 135,493
Mortgages payable 8,449,306 7,622,998
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Total Liabilities 8,941,959 8,210,054
Stockholders' equity
Common stock - authorized 1,000,000 shares
$.01 par value per share, issued 520,970 shares 5,210 5,210
Additional paid-in capital 4,652,912 4,636,260
Retained earnings 201,950 380,626
Less treasury stock, at cost, 104,660 shares (195,602) (192,477)
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Total Stockholders' Equity 4,664,470 4,829,619
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$ 13,606,429 $ 13,039,673
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</TABLE>
See notes to consolidated financial statements
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b) Consolidated Statement of Operations
RESOURCE CAPITAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Income
Rental operations $ 485,713 $ 392,553 $1,488,078 $1,138,871
Interest - affiliated entity 120,360
Equity in earnings (loss) of
unconsolidated partnerships 31,563 211,492
Management fees - affiliated entity 7,206
Interest - investments 8,962 28,501 30,057 72,324
Gain on sale of marketable securities 158
Other income 1,429 923 26,313 3,429
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Total Income 496,104 453,540 1,544,448 1,553,840
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Expenses
Rental operations 145,052 111,319 427,869 321,591
General and administrative 219,457 182,747 600,662 549,495
Interest 180,442 126,202 506,237 364,361
Depreciation and amortization 84,734 68,533 278,330 183,912
--------- --------- ---------- ----------
Total Expenses 629,685 488,801 1,813,098 1,419,359
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Income (loss) before income taxes (133,581) (35,261) (268,650) 134,481
(Provision for) benefit of income taxes 45,417 11,988 89,974 (45,724)
--------- --------- ---------- ----------
Net income (loss) $ (88,164) $ (23,273) $ (178,676) $ 88,757
========= ========= ========== ==========
Basic earnings (loss) per share $ (.21) $ (.06) $ (.43) $ .21
========= ========= ========== ==========
Weighted average shares outstanding 416,310 417,301 416,446 414,931
========= ========= ========== ==========
</TABLE>
See notes to consolidated financial statements
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b) Consolidated Statement of Cash Flows
RESOURCE CAPITAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
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2000 1999
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<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ (178,676) $ 88,757
Adjustments to reconcile net income (loss) to net
cash (used) by operating activities
Depreciation and amortization 278,330 183,912
Equity in earnings of unconsolidated partnerships (211,492)
Provision for deferred income taxes (285,544)
Gain on sale of marketable equity securities (158)
Issuance of stock warrants 16,652 16,528
Changes in certain other accounts
Deferred charges and other assets (249,566) 76,847
Accounts payable 100,924 3,777
Accrued expenses (175,877) (1,948)
Security deposits and other (19,450) 17,346
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Net cash (used) by operating activities (227,663) (111,975)
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Cash flows from investing activities
Distribution from partnership 76,904
Construction in progress costs (260,278)
Additions to real and personal property (366,656) (1,105,270)
Proceeds from mortgage note receivable 325,554
Repayments from affiliated entity 1,014,000
Receipt from sale of marketable securities 17,784
Deposit on property purchase (150,000)
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Net cash provided (used) by investing activities (626,934) 178,972
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Cash flows from financing activities
Dividends paid (417,301)
Exercise of stock warrants 12,362
Payments on mortgage payable (1,278,670)
Proceeds of mortgage payable 2,242,060 557,940
Mortgage amortization payments (137,082) (110,957)
Deferred mortgage costs (32,082) (42,448)
Purchase of treasury stock (3,125)
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Net cash provided (used) by financing activities 791,101 (404)
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Net increase (decrease) in cash and cash equivalents (63,496) 66,593
Cash and cash equivalents at beginning of period 593,863 2,212,570
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Cash and cash equivalents at end of period $ 530,367 $ 2,279,163
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Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 508,682 $ 349,529
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Cash paid during the period for income taxes $ 244,742 $ 320,883
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</TABLE>
See notes to consolidated financial statements
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RESOURCE CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements of Resource Capital
Group Inc. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the management
of Resource Capital Group Inc., all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2000,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1999.
Note 2 Summary of significant accounting policies
Principles of Consolidation
The consolidated financial statements of Resource Capital Group, Inc. have been
prepared in accordance with generally accepted accounting principles and reflect
the policies detailed below.
The consolidated financial statements of the Company include the accounts of
Resource Capital Group, Inc. and its subsidiaries: 8050 Roswell Associates, LLC,
(Roswell); 419 Crossville Associates, LLC (Crossville); Colonial Park Commons
LLC, (Colonial); Heide Lot, LLC (Heide); 8046 Roswell Road, LLC (8046);
Woodstock Office I, LLC (Woodstock); 920 Holcomb Bridge, LLC (Holcomb); RCGI
Montclair I, LLC (Montclair); RCGI Oakmont, LLC, (Oakmont); RCGI Millwood, LLC
(Millwood); RCGI Old Canton,LLC (Old Canton); Wilton Center, LLC, (Wilton) and
Hunter Management Company. Where subsidiaries were acquired or disposed of
during the period the operating results are included from the date of
acquisition or through the date of sale. All intercompany transactions and
balances have been eliminated in consolidation.
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Note 3 Earnings (loss) per share
Basic earnings (loss) per share of common stock is computed by dividing net
earnings (loss) by the weighted average number of shares outstanding during the
period. The dilutive effect of stock warrants is not considered significant for
any of the periods presented.
Note 4 Construction of an office complex
During 2000, the Company entered into a contract for the construction of an
office complex on its Wilton property for $4,207,101. As of September 30, 2000
costs of $64,554 have been incurred on this contract and are included as a part
of the $297,771 construction in progress in the accompanying financial
statements.
In connection with this project, in November 2000 the Company closed a
construction loan in the amount of $4,640,000, but not to exceed 80% of total
development cost. The loan will mature November 1, 2005 and will require
interest only payments for the first twelve months at the lender's base rate.
From the thirteenth month until maturity fixed monthly principal payments of
$4,608 plus interest at the lender's base rate will be required. At September
30, 2000 nothing has been drawn under this facility.
Note 5 Mortgages and notes payable
On June 23, 2000 the Company closed a mortgage note in the amount of $1,350,000
secured by the Colonial property. The note bears interest at 10% per annum and
matures on June 23, 2005. The terms of the note require that monthly payments of
$13,158 be applied first to interest and the balance to reduction of principal.
Proceeds of the loan were used to repay the existing first mortgage on the
property in the amount of $728,670.
In March, 2000, the Company closed a ninety day bank note in the amount of
$550,000 secured by the Wilton Center property in order to partially finance its
acquisition costs. The note was repaid in June 2000 and required monthly
payments of interest only at the lender's base rate plus l%, which was 10.5% at
maturity.
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In January 2000 the remaining $342,060 in mortgage proceeds were drawn under the
Heide credit facility. The $900,000 mortgage required interest only monthly
payments through March 2000 at the lender's base rate plus 1%. Commencing in
April 2000 the interest was fixed at 9.38% per annum until maturity in March
2004. The terms of the note require that monthly payments of $8,319 be applied
first to interest and the balance to reduction of principal.
Note 6 Warrants
In September 2000 the Company issued 4,163 common stock purchase warrants valued
at $16,652 to its new member of the Board of Directors. Each warrant allows the
purchase of one share of the Company's common stock at a price of $1 per share.
The warrants are exercisable until August 31, 2003. At September 30, 2000, none
of these warrants have been exercised.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Liquidity and Capital Resources
The Company's liquidity is based primarily on its cash reserves, real estate
operating income, its ability to obtain mortgage financing plus its ability to
sell and refinance its real estate investments. These funds are used to pay the
Company's normal operating expenses and fund new acquisitions.
As of September 30, 2000, the Company had cash reserves of $530,367. Management
believes the Company's cash reserves and current and projected future levels of
income are sufficient to meet the Company's current level of operating expenses
on an ongoing basis.
Based on the year 2000 and future budgets and recent property valuations
management believes that the Company's real estate investments should produce
future operating cash flows and future resale values for the Company.
For the nine months ended September 30, 2000 the Company utilized $227,663 in
cash from operating activities, principally from operating losses and an
increase in deferred charges and other assets. The Company generated $791,101 in
cash from financing activities, principally from the net proceeds of mortgages
payable. The Company utilized $626,934 in cash for investing activities,
principally for the additions to real and personal property and construction in
progress. These activities resulted in an overall net decrease in cash of
$63,496 for the nine months ended September 30, 2000.
Results of Operations
For the three months ended September 30, 2000 the Company realized a net loss of
$88,164 compared to a net loss of $23,273 for the same period in 1999. For the
nine months ended September 30, 2000 the Company realized a net loss of $178,676
compared to net income of $88,757 for the same period in 1999.
These figures reflect a decrease in earnings of $64,891 for the three month
period ended September 30, 2000 and $267,433 for the nine month period ended
September 30, 2000 when compared to the same periods in 1999. This decline was
caused primarily by the loss in revenues associated with the Company's final
transition from apartment type partnership and mortgage investments with
affiliated entities to constructing, owning, and operating specialized office
buildings. Revenues from these affiliated entities dropped by $31,563 and
$339,058 for the latest quarter and nine month periods respectively when
compared to 1999 results for the same periods. These decreases resulted from the
transitioning of the Company's assets from income producing partnership and
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mortgage holdings into the acquisition of development land and office
construction and reconstruction projects that will not begin producing revenues
until construction is completed and the properties are leased up.
These decreases, however, were partially offset by increases in rental revenues
of $93,160 and $349,207 respectively for the third quarter and nine month
periods ended September 30, 2000 when compared to the same periods of 1999.
These increases were due primarily to the acquisitions of Old Canton and
Millwood and substantial completion of the construction and lease up of Colonial
Park II (Heide) at the end of 1999.
The net result of the increase in rental income and the decrease in income from
affiliates was that total revenue only slightly decreased for the nine months
ended September 30, 2000 ($1,544,448 versus $1,553,840) when compared to the
same period in 1999.
The increase in rental income however was accompanied by an increase in rental
operating expenses, interest and depreciation and amortization expenses. Total
expenses for the three months ended September 30, 2000 were $629,685 compared to
$488,801 for the same period in 1999. This increase in expenses was the result,
in part, of the November 1999 Old Canton and Millwood acquisitions and the
substantial completion of the Heide development in 1999. Rental operating
expenses increased by $33,733, interest expense increased by $54,240 and
depreciation and amortization expense increased by $16,201 primarily as a result
of these additions.
Total expenses for the nine months ended September 30, 2000 were $1,813,098
versus $1,419,359 for the same period in 1999. This increase in expenses is also
attributable, in part, to the November 1999 acquisitions of Old Canton and
Millwood, the substantial completion of the Heide development in 1999 and the
amortization of the remaining loan costs in the amount of $22,248 on the
Colonial mortgage that was repaid in June 2000. Rental operating expenses
increased by $106,278, interest expense increased by $141,876 and depreciation
and amortization expense increased by $94,418 when compared to the same period
in 1999.
General and administrative expenses for the three months ended September 30,
2000 of $219,457 increased $36,710 from the same period last year. This increase
in expenses is attributable to increased wages and professional fees and the
September 2000 issuance of stock warrants to an outside director valued at
$16,652. For the nine months ended September 30, 2000 general and administrative
expenses increased $51,167 from the corresponding period in 1999 for primarily
the same reason.
Inflation
Inflation in the future may increase rental revenues as well as operating
expenses, all in accordance with general market trends.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Resource Capital Group, Inc.
(Registrant)
By: /s/ Albert G. Schmerge III
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Albert G. Schmerge III
President, CEO and
Chairman of the Board
Date: November 14, 2000
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