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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 March 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
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)
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<S> <C>
Delaware 13-3617377
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
419 Crossville Road Suite 204 Roswell, Georgia 30075
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(Address of principal executive offices) (Zip Code)
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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 March 31, 2000, 416,310 shares of common stock of the Registrant were
outstanding.
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INDEX
RESOURCE CAPITAL GROUP, INC.
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<CAPTION>
Part I. Financial Information
Page
Number
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Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet - March 31, 2000
and December 31, 1999 3
Consolidated Statement of Operations - For the
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statement of Cash Flows - For the
Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
a) Consolidated Balance Sheet
RESOURCE CAPITAL GROUP, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
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<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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(unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,008,859 $ 593,863
Real and personal property, at cost (Note 4)
Land 3,721,554 3,721,554
Buildings and improvements 8,519,037 8,404,536
Furniture and equipment 490,386 472,255
Construction in progress 51,725 37,493
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12,782,702 12,635,838
Less accumulated depreciation (662,859) (583,918)
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12,119,843 12,051,920
Deferred tax asset 19,720 19,720
Deferred charges-net of accumulated amortization 225,921 223,339
Other assets 248,748 150,831
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$ 13,623,091 $ 13,039,673
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 81,687 $ 86,440
Accrued expenses
Interest 55,407 52,716
Payroll 13,807 122,418
Professional fees 13,250 26,000
Property taxes 31,879 --
Income taxes -- 145,919
Other 750 18,070
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115,093 365,123
Security deposits and other 161,109 135,493
Mortgages payable (Note 5) 8,471,413 7,622,998
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Total Liabilities 8,829,302 8,210,054
Stockholders' equity
Common stock - authorized 1,000,000 shares
$.01 par value per share, issued 520,970 shares 5,210 5,210
Additional paid-in capital 4,636,260 4,636,260
Retained earnings 347,921 380,626
Treasury stock, at cost, 104,660 shares (195,602) (192,477)
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Total Stockholders' Equity 4,793,789 4,829,619
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$ 13,623,091 $ 13,039,673
============ ============
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See notes to consolidated financial statements
3
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b) Consolidated Statement of Operations
RESOURCE CAPITAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months Ended
March 31,
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2000 1999
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<S> <C> <C>
Income
Rental operations $ 496,508 $ 374,294
Interest - affiliated entity -- 8,723
Equity in earnings of
unconsolidated partnerships, net -- 81,502
Management fees - affiliated entity -- 5,562
Interest - investments 8,730 21,297
Gain on sale of marketable equity securities -- 158
Other income 20,473 1,364
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Total Income 525,711 492,900
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Expenses
Rental operations 134,662 104,260
General and administrative 192,926 192,185
Interest 159,970 118,385
Depreciation and amortization 85,636 57,267
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Total Expenses 573,194 472,097
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Income (loss) before income taxes (47,483) 20,803
(Provision for) benefit of income taxes 14,778 (7,073)
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Net income (loss) $ (32,705) $ 13,730
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Basic earnings (loss) per share (Note 3) $ (0.08) $ 0.03
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Weighted average shares outstanding 416,732 410,111
========= =========
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See notes to consolidated financial statements
4
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b) Consolidated Statement of Cash Flows
RESOURCE CAPITAL GROUP, INC.
Consolidated Statement of Cash Flows
(Unaudited)
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<CAPTION>
Three Months Ended
March 31,
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2000 1999
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<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (32,705) $ 13,730
Adjustments to reconcile net income (loss) to net
cash (used) by operating acctivties
Depreciation and amortization 85,636 57,267
Equity in earning of unconsolidated partnerships -- (81,502)
Provision for deferred income taxes -- (285,544)
Gain on sale of marketable equity securities -- (158)
Issuance of stock warrants -- 16,528
Changes in certain other accounts
Deferred charges and other assets (97,917) 19,851
Accounts payable (4,753) 1,626
Accrued expenses (250,030) 81,698
Security deposits and other 25,616 6,781
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Net cash (used) by operating activities (274,153) (169,723)
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Cash flows from investing activities
Additions to real and personal property (132,632) (79,016)
Construction in progress costs (14,232) (256,472)
Receipt from sale of marketable equity securities -- 17,784
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Net cash (used) by investing activities (146,864) (317,704)
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Cash flows from financing activities
Dividends paid -- (417,301)
Exercise of stock warrants -- 12,362
Purchase of treasury stock (3,125) --
Proceeds of mortgages payable 892,060 24,765
Mortgage amortization payments (43,645) (35,261)
Deferred mortgage costs (9,277) (31,336)
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Net cash provided (used) by financing activities 836,013 (446,771)
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Net increase (decrease) in cash and cash equivalents 414,996 (934,198)
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 $ 1,008,859 $ 1,278,372
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See notes to consolidated financial statements
5
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RESOURCE CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 months ended
March 31, 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 the date of sale. All intercompany transactions and balances
have been eliminated in consolidation.
6
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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 diluted earnings (loss) per share for the period were the same as
the basic earnings (loss) per share.
Note 4 Construction of an office complex
During 1999, the Company acquired its Wilton Center property for the purpose of
constructing an office complex. As of March 31, 2000, work in the amount of
$51,725 has been completed on this project and is included as a part of
construction in progress in the accompanying financial statements.
Note 5 Mortgages payable
In March, 2000 the Company closed a mortgage note in the amount of $550,000
secured by the Wilton Center property in order to partially finance its
acquisition costs. The note matures June 30, 2000 and requires interest only
monthly payments at the lender's base rate plus l%, which is currently at 10%.
The Company intends to replace this loan with a construction loan by June 30,
2000.
In addition, in January 2000 the remaining $342,060 in mortgage proceeds were
drawn under the Heide credit facility. The $900,000 mortgage requires interest
only monthly payments through March 2000 at the lender's base rate plus 1%.
Commencing in April 2000 until maturity in March 2004, monthly principal and
interest payments based on 20-year amortization will be required and interest
will be fixed at the five-year Treasury constant maturity plus 275 basis points
with a floor of 8%.
7
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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 March 31, 2000, the Company had cash reserves of $1,008,859. The
Company's cash reserves and current level of income are sufficient to meet the
Company's current level of operating expenses on an ongoing basis.
Based on 2000 and future budgets and recent property valuations it appears the
Company's real estate investments should produce future operating cash flows
and future resale values for the Company.
For the three months ended March 31, 2000 the Company utilized $274,153 in cash
for operating activities, principally for the reduction in accrued expenses.
The Company generated $836,013 in cash from financing activities, principally
from the net proceeds of mortgages payable. The Company utilized $146,864 in
cash for investing activities, principally for the additions to real and
personal property for an overall net increase in cash of $414,996 for the
period.
Results of Operations
For the three months ended March 31, 2000 the Company realized a net loss of
$32,705 compared to net income of $13,730 for the same period in 1999.
Total revenue for the three months ended March 31, 2000 was $525,711 versus
$492,900 in 1999. Rental income increased $122,214 for the period primarily due
to the Old Canton and Millwood acquisitions in November 1999 and the
substantial completion of the Heide development in 1999. The equity in earnings
and related interest income from affiliates decreased in 2000 due to the
Company's disposition of its partnership investments in 1999.
Total expenses for the three months ended March 31, 2000 were $573,194 compared
to $472,097 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 $30,402, interest expense increased by $41,585 and
depreciation and amortization expense increased by $28,369 primarily as a
result of these additions.
8
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General and administrative expenses for the three months ended March 31, 2000
were relatively unchanged from the same period last year.
Inflation
Inflation in the future may increase rental revenues as well as operating
expenses, all in accordance with general market trends.
9
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PART II
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
10
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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.
Resources Capital Group, Inc.
(Registrant)
By: /s/ Albert G. Schmerge III
----------------------------------------
Albert G. Schmerge III
President, CEO and
Chairman of the Board
Date: May 12, 2000
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,008,859
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,782,702
<DEPRECIATION> 662,859
<TOTAL-ASSETS> 13,623,091
<CURRENT-LIABILITIES> 0
<BONDS> 8,471,413
0
0
<COMMON> 5,210
<OTHER-SE> 4,788,579
<TOTAL-LIABILITY-AND-EQUITY> 13,623,091
<SALES> 0
<TOTAL-REVENUES> 525,711
<CGS> 0
<TOTAL-COSTS> 134,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 159,970
<INCOME-PRETAX> (47,483)
<INCOME-TAX> (14,778)
<INCOME-CONTINUING> (32,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,705)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
