-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OLdmYtHImLQ9xFixeMgKrhevzinwVBZvjUDfUnGqkRVlxgPmLETPzOaiwdOoIQcT Gt7E6ACXlYmf0uiz8LFnlg== 0001030984-99-000005.txt : 19990927 0001030984-99-000005.hdr.sgml : 19990927 ACCESSION NUMBER: 0001030984-99-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKY MOUNTAIN POWER CO CENTRAL INDEX KEY: 0001030984 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 840503585 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22027 FILM NUMBER: 99716520 BUSINESS ADDRESS: STREET 1: 12835 E ARAPAHOE RD T-11 STREET 2: STE 110 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037922466 MAIL ADDRESS: STREET 1: 12835 E ARAPAHOE RD T-11 STREET 2: #110 CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee required) For the fiscal year ended X June 30, 1999 - -------- or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No fee required) - -------- For the Transition Period from ____________ to _____________ Commission File Number 0-22027 -------------------- ROCKY MOUNTAIN POWER CO. --------------------------------------------------------- (Name of Small business Issuer as Specified in its charter) N/A --------------------------- (Previous name of Registrant) Colorado 84-0503585 ----------------------------- --------------------- (State or other jurisdiction of incorporation or organization) (IRS Employer ID Number) 12835 E. Arapahoe Road, T-II #110, Englewood, Colorado 80112 ------------------------------------------------------ -------- (Address of principal executive offices) (Zip Code) Issuer's telephone number: (303) 792-2466 Securities to be registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock Name of each exchange on which registered ----------------------------------------- N/A Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(b) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject of such filing requirements for the past 90 days. YES X NO --------- --------- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ( X ) The Issuer's revenues for its most recent year ended June 30, 1999 were $209,084. The Issuer is unable to calculate the aggregate market value of the common stock of the Registrant held by nonaffiliates because there is a limited market for the common stock. As of June 30, 1999, 608,917 shares of common stock were outstanding. Documents incorporated by reference: None. Transitional Small Business Disclosure Format (Check One): Yes No X --------- --------- 1 PART I Item 1. Description of Business General Rocky Mountain Power Co. (RMPC) is a corporation which was formed under the laws of the State of Colorado on September 30, 1958. The Articles of Incorporation of the Company authorize it to issue 100,000,000 shares of common stock with $.05 per share par value and 200,000 shares of preferred stock with a par value of $25.00 per share. RMPC has approximately 439 shareholders. The RMPC common stock is traded on the NASDAQ Bulletin Board under the symbol RMPC. The principal executive offices of the Company are located at 12835 E. Arapahoe Road, T-II, #110, Englewood, Colorado 80112, and the Company's telephone number is (303) 792-2466. The Company has selected June 30 as its fiscal year end. Recent Developments None Description of Business RMPC's wholly owned subsidiary Prime Rate Income & Dividend Enterprises, Inc. (PRIDE), is principally in the real estate investment business. PRIDE also is in the business of investing in foreclosure sale real estate certificates of purchase in the Denver Metropolitan area. PRIDE acquires the certificates of purchase by bidding at foreclosure sales. Under Colorado statutes, there is generally a minimum redemption period of seventy-five (75) days whereby the property owner can redeem the foreclosed property by paying the certificate of purchase balance bid price plus interest at the rate specified on the mortgage note, plus reimbursement of certain costs and expenses incurred by the holder of the certificate of purchase during the redemption period. If the former property owner fails to redeem the property, then junior lienholders have a right to redeem. If the property is not redeemed, the holder of the certificate of purchase will be granted title to the property. It is PRIDE's investment policy to invest in certificates of purchase that have sufficient equity such that it is likely that the property will be redeemed. As of June 30, 1999 the Company had $906,464 invested in mortgage notes 2 receivable. The Company's investments in mortgage loans are collateralized principally by deeds of trust on real estate located primarily in Colorado, California and Arizona. As of June 30, 1999, the Company had seven mortgage loans receivable from one individual totaling approximately $87,243. The loans as a percentage of value of the real estate collateral were approximately 90% at the time of sale. The Company also had, as of June 30, 1999 17 mortgage loans reciveable from another non-affiliated individual totaling approximately $565,497. The second individual's loans as a percentage of value of the real estate collateral were approximately 100% at the time of sale but, as additional collateral for the loans receivable from this individual, the Company has a junior lien on another property owned by this individual. These mortgage loans to the two individuals are a material concentration of credit risk. The Market Opportunity The market opportunity for investments in foreclosure real estate certificates of purchase varies depending upon such factors as interest rates, general economic conditions and real estate construction costs. The Company markets its real estate generally through listings with real estate brokers. Competition PRIME's real estate business is highly competitive. There are thousands of real estate investors in the United States of America that are investing in similar rental properties. The level of competition in the acquisition, sale and renting of real estate properties is effected by economic conditions in the area as well as interest rates available to borrowers. PRIME's business of investing in certificates of purchase is also highly competitive since there is open bidding allowed on all real estate foreclosures. Typically at the foreclosure sales, there will be between five and twenty individuals in attendance and between three and seven actual bidders in addition to the foreclosing lenders bidding on the properties collateralizing their loans. Employees The Company has no full time employees. Mr. Michael L. Schumacher, the Company's President, Mr. George A. Powell, the Company's Vice President and Mr. James D. Phelps, the Company's Secretary devote approximately 25%, 50% and 1% respectively, of their time to the Company's business. The real estate properties are managed by various independent property management companies. 3 Item 2. Description of Property (a) PRIDE and RMPC currently use minimal office space and facilities provided at no cost by the Company's President. (b) PRIDE and its subsidiaries invest in real estate and real estate mortgages primarily for rental and interest income. By investing in real estate that provides current income plus the opportunity of long-term capital gains, the Company is attempting to realize reasonable current operating income plus a potential hedge against long-term inflation. Historically residential real estate values have appreciated at least equal to the inflation rate, but there can be no assurance of future appreciation. The Company has no limitations or policies on the percentage of assets which may be invested in any one investment, or type of investment. (1) The Company may invest in any type of real estate but currently principally has investments in residential rental houses. The Company also owns one residential condominium and thirteen residential lots. The Company engages independent property management companies to manage the rental properties. The property management companies find tenants, collect the rent and pay certain expenses on the Company's behalf and remit net rent monthly to the Company. The Company has financed its real estate acquisitions with its own capital plus assumption of exsisting loans on properties or owner carry back loans on properties. The Company has no limitation policy on the number or amount of mortgages which may be placed on any one piece of property. Appropriateness of real estate investments and related financing decisions are determined by the officers of the Company. (2) The Company's investments in mortgage loans are principally loans carried back on properties sold. Management has no current plans to actively invest in mortgage loans other than those related to properties sold by the Company. The Company has and may continue to provide carry back loans on properties equal to 100% of the sales price of properties if adequate additional collateral is provided. (3) The Company currently has no investments and no plans to invest in securities of or interests in persons primarily engaged in real estate activities. (c) As of June 30, 1999, the Company had no investments in real estate which amounted to ten percent or more of the total assets of the Company. The Company has approximately $241,000 invested in other real estate. Generally summarized as follows: 4 Description Three acres of land with a rental home on the property located in Oakhurst, California, near Yosemite National Park. This property is zoned for multiple family housing. Thirteen residential lots located in Nebraska, Arkansas, Florida and North Dakota $ 160,000 81,000 ------------ $ 241,000 ============ All of the above properties are free and clear of encumbrances. The rental house has an annual lease. There are no options or contracts related to the sale of any of the properties owned by the Company. There are no plans for renovation, improvement or development of any of the properties owned. The Company intends to hold the residential rental property for its current income production and also for the possibility of long-term capital gains. Management believes that all properties have adequate insurance coverage. The residential rental property has had vacancies of less than 5% during the last two years. Item 3. Legal Proceedings RMPC is not party to any material legal proceeding, nor is the Company's property the subject of any material legal proceeding. Item 4. Submission of Matters to a Vote of Security Holders None during the year ended June 30, 1999. PART II Item 5. Market for Company's Common Equity and Related Stockholder Matters (a) Market Information. As of June 30, 1999 the RMPC common stock was listed on the NASDAQ Bulletin Board under the symbol "RMPC." The first available quotes on the bulletin board appeared in the 4th quarter of 1997. The bid prices included below have been obtained from sources believed to be reliable: Low High Quarters Ended Bid Bid December 31, 1997 3.25 3.50 March 31, 1998 3.00 3.25 June 30, 1998 3.00 3.50 September 30, 1998 3.00 3.25 December 31, 1998 3.00 3.25 March 31, 1999 3.00 3.25 June 30, 1999 3.00 3.25 5 The Company has applied for quotation of the Common Stock on the NASDAQ Small Cap Exchange operated by the National Association of Securities Dealers, Inc. and has initially been denied listing status. The Company is currently appealing the decision. (b) Holders. RMPC has approximately 608,917 shares of common stock issued and outstanding as of June 30, 1999, which are held by approximately 439 shareholders. Of such shares, approximately 240,000 shares, held by approximately 420 shareholders are eligible for resale. The remaining shares are restricted shares under Rule 144. The Company presently has no existing stock option or other plans nor are there any outstanding options, warrants or securities convertible into Common Stock. (c) Dividend Policy. RMPC has never paid a dividend on its common stock. The Company does not anticipate paying any dividends on its common stock in the foreseeable future. Management anticipates that earnings, if any, will be retained to fund the Company's working capital needs and the expansion of its business. The payment of any dividends is at the discretion of the Board of Directors. Item 6. Management's Discussion and Analysis or Plan of Operations Plan of Operations GENERAL RESULTS OF OPERATIONS Year Ended June 30, 1998 Revenue for the year ended June 30, 1998 was approximately $320,000 as compared to revenue of approximately $341,000 for the eight months ended June 30, 1997. The average per month for the year ended June 30, 1998 was approximately $27,000 as compared to approximately $43,000 per eight month period ended June 30, 1997. This decrease resulted principally from less rental income during the period ended June 30, 1998 since various properties were sold near the end of the period ended June 30, 1997. The Company's interest income increased principally due to the carryback mortgages on properties sold. During the year ended June 30, 1998 and the eight month period ended June 30, 1997 the Company had gains from the sale of real estate of approximately $97,000 and $114,000 respectively. Past gains may not necessarily be indicative of future results. Operating expenses were approximately $182,000 during the year ended June 30, 1998, and approximately $167,000 during the eight month period ended June 30, 6 1997. The average per month for the Period ended June 30, 1998 was approximately $15,000 as compared to approximately $21,000 per month for the eight month period ended June 30, 1997. The decreases relate principally to the decrease in operating and interest expenses on properties previously owned. Net income after the provision for income taxes decreased from approximately $133,000 during the eight month period ended June 30, 1997 to approximately $100,000 during the year ended June 30, 1998, a decrease of approximately $2,700 per month. Year Ended June 30, 1999 Revenue for the year ended June 30, 1999 was approximately $210,000 as compared to revenue of approximately $320,000 for the year ended June 30, 1998. The average per month for the year ended June 30, 199 was approximately $17,500 as compared to approximately $27,000 per month for the year ended June 30, 1998. This decrease resulted in part from less rental income and less management fee income during the period ended June 30, 1999 since various properties were sold near the end of the period ended June 30, 1998. The Company's interest income decreased principaly due to the payoff of several mortgages on properties sold. During the year ended June 30, 1999 and the year ended June 30, 1998 the Company had gains from the sale of real estate of approximately $44,000 and $97,000 respectively. Past gains may not necessarily be indicative of future results. Operating expenses were approximately $59,000 during the year ended June 30, 1999, and approximately $182,000 during the year ended June 30, 1998. The average per month for the period ended June 30, 1999 was approximately $5,000 as compared to approximately $15,000 per month for the year ended June 30, 1998. The decreases relate principally to the decrease in operating and interest expenses on properties previously owned. Net income after the provision for income taxes increased from approximately $100,000 during the year ended June 30, 1998 to approximately $110,000 during the year ended June 30, 1999, an increase of approximately $800 per month. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1998 the Company had an unrestricted cash balance of approximately $70,000. The Company's current assets were approximately $1,342,000 at June 30, 1998 and its current liabilities totaled approximately $389,000, resulting in net working capital of approximately $953,000, a current ratio of approximately 3.45 to one. At June 30, 1999 the Company had an unrestricted cash balance of approximately 7 $445,000. The Company's current assets were approximately $1,171,000 at June 30, 1998 and its current liabilities totaled approximately $87,000, resulting in net working capital of approximately $1,084,000, a current ratio of approximately 13.46 to one. FINANCIAL POSITION Stockholders' equity totaled approximately $2,130,000 at June 30, 1999 as compared to approximately $2,017,000 at June 30, 1998, an increase of approximately $113,000. This increase resulted from a net income of approximately $110,000 and additional stock issued in the approximate amount of $3,500. Management has not made any commitments which will require any material financial resources in excess of resources now available to the Company. Subsequent Events None Forward-Looking Statements Certain statements concerning the Company's plans and intentions included herein constitute forward-looking statements for purposes of the Securities Litigation Reform Act of 1995 for which the Company claims a safe harbor under that Act. There are a number of factors that may affect the future results of the Company, including, but not limited to, (a) interest rates, (b) general economic conditions and (c) specific economic conditions within the areas where the Company operates. This annual report contains both historical facts and forward-looking statements. Any forward-looking statements involve risks and uncertainties, including, but not limited to, those mentioned above. Moreover, future revenue and margin trends cannot be reliably predicted. Item 7. Financial Statements Please see pages F-1 through F-11. Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no disagreements between the Company and its independent accountants on any matter of accounting principles or practices or financial statement disclosure. There have been no changes in the Company's independent accountants. 8 PART III Item 9. Directors, Executive Officers, and Control Persons The directors and officers of RMPC are as follows: NAME AGE POSITION(S) TENURE Michael L. Schumacher 50 President and Director October 31, 1996 to present George A. Powell 72 Vice President and Director October 31, 1996 to present James D. Phelps 59 Secretary and Treasurer 1992 to present Robert S. Benham 56 Director October 1996 to present Robert F. Moreland58 Director 1989 to present Norman L. Horsfield74 Director 1989 to present Peter Porath 68 Director 1997 to present Michael L. Schumacher has been a director and president of RMPC since October 31, 1996. He also has been a director and president of PRIME and its subsidiaries since inception, May 1, 1995. Mr. Schumacher was previously, until 1995, a director and president of Universal Capital Corporation and High Hopes, Inc., both public reporting companies. Universal Capital Corporation was an inactive public shell and High Hopes, Inc. was a real estate investment company while Mr. Schumacher was serving as president and director. Mr. Schumacher is the director and President of Schumacher & Associates, Inc., a certified public accounting firm located in Englewood, Colorado that provides audit services, principally to public companies on a national basis throughout the U.S.A. Mr. Schumacher is a Certified Public Accountant, Certified Management Accountant and an Accredited Financial Planning Specialist. Mr. Schumacher has a bachelors degree in Business Administration with a major in accounting from the University of Nebraska at Kearney and a Masters in Business Administration from the University of Colorado. George A. Powell has been a director and vice president of RMPC since October, 1996. He also has been a director and vice president of PRIME and its subsidiaries since October, 1996. Mr. Powell was previously a director and president of Continental Investors Life, Inc., a public reporting insurance company. Since Mr. Powell's retirement from the insurance business in 1988, he has been self-employed as a business consultant. James D. Phelps has been secretary of RMPC since 1992 and a director since 1997. Mr. Phelps also serves as a board member on the City of Englewood Police Pension Board. Mr. Phelps is temporarily serving as president- treasurer of Mountain Specialists Limited and for the past ten years has been 9 self employed as a consultant/accountant for various clients in the Denver metropolitan area. Robert S. Benham has been a director of RMPC since 1996. Until 1994, Mr. Benham served as a receiver for the State of Colorado, Division of Insurance, for various insurance company receivership and liquidation proceedings. Mr. Benham is currently a director and president of Robert S. Benham & Associates, Inc. (DBA Bookworld, Inc.) in the rare and collectible book business in Aurora, Colorado. Mr. Benham has a bachelors degree in accounting and finance from the University of Denver. Mr. Benham previously was a licensed real estate broker. Robert F. Moreland has been a director of RMPC since 1989. Mr. Moreland was also president of RMPC from 1992 through October, 1996. Mr. Moreland is currently employed by the State of Texas General Land Office. Mr. Moreland is a graduate of Louisiana State University and Southern Methodist University School of Law, and is a member of the Colorado and Texas state bars. Norman L. Horsfield has been a director of RMPC since 1982. Mr. Horsfield has a degree from England in Electrical Engineering and has retired as an electrical engineer with English Electric Corporation. Peter Porath has been a director of RMPC since 1997. Mr. Porath has a Bachelor's Degree from 1998. RIPON College and an L.L.B. degree from DePaul University. Mr. Porath is currently President of Dunhill Sports, a private company in the sports products industry. Mr. Porath was previously President of Vacation Ownership Marketing, a real estate development company. Mr. Porath also was previously Vice-president of Investment Corporation of Florida, a real estate development company that developed the City of Wellington, Florida and Palm Beach Polo Club. Item 10. Executive Compensation There was no compensation paid to any officer of RMPC or PRIME other than director fees paid to RMPC directors. Board of Director Meetings and Committees The Board of Directors held no meetings during the year ended June 30, 1999, but entered into various consent resolutions in lieu of meetings. The Company's Board of Directors has established an Audit Committee. The function of the Audit Committee is to review the results and scope of the audit and other services provided by the Company's independent auditors, review and evaluate the Company's internal audit and control functions and monitor transactions between the Company and its employees, officers and directors. 10 Summary Compensation Table The following table sets forth the aggregate cash compensation paid by the Company for services rendered during the last three years to the Company by its Chief Executive Officer and to each of the Company's other executive officers whose annual salary, bonus and other compensation exceeded $100,000 in 1999. Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts ------ ------- Other Annual Restricted Compen- Stock Options/ LTIP sation Award(s) SARs Payouts Name & Principal ($) (%) (#) ($) Position Year Salary($) Bonus($) Michael L. Schumacher 1999 $ - $ - $ - $ - - $ - (1) Mr. Schumacher received $500 of common stock (2) as directors fees during the period ended June 30, 1999. Compensation of Directors There was no compensation paid to any director of RMPC or PRIME other than $3,500 paid as director fees to RMPC directors for the year ended June 30, 1999, and $3,500 paid as directors fees to RMPC directors for the year ended June 30, 1998. Employment Agreements None Long-Term Incentive Plan None Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, all individuals known to beneficially own 5% or more of the Company's common stock, and all officers and directors of the registrant, with the amount and percentage of stock beneficially owned as of June 30, 1999: Name and Address Amount and Nature Percent of Beneficial Holder of Beneficial Ownership Michael L. Schumacher (1) 234,552 shares 38.520% 12835 E. Arapahoe, T-II, #110 Englewood, CO 80112 11 Terry and Susan R. Seipelt 52,959 shares 8.697% 11330 North Scioto Avenue Oro Valley, AZ 85737 Jackie Sanders 68,304 shares 11.217% 1301 Electric Avenue Seal Beach, CA 90740 Harold L. Morris (2) 132,548 shares 21.767% 3991 MacArthur Blvd. #100 Newport Beach, CA 92660 George A. Powell 1,284 shares 2.109% Vice President and Director 7333 S. Fillmore Circle Littleton, CO 80122 Norman L. Horsfield 1,128 shares 1.852% Director 2567 Wilt Road Fallbrook, CA 92028 James D. Phelps 410 shares .067% Secretary and Director 4735 S. Kalamath Street Englewood, CO 80110 Robert S. Benham 628 shares .103% Director 9273 E. Eastman Place Denver, CO 80231 Robert F. Moreland 469 shares .077% Director 12 Parrot Trail Round Rock, TX 78681 Peter Porath 335 shares .055% Director 12773 Forest Hill Blvd. #209 Wellington, FL 33414 Officers and directors as a 238,806 shares 39.218% group (1) Michael L. Schumacher owns 628 shares individually. In addition, Mr. Schumacher, President and Director of RMPC and his spouse Zona R. Schumacher are the sole beneficiaries of the Schumacher & Associates, Inc. Money Purchase Plan & Trust (Schumacher Plan) which owns 230,399 shares of RMPC. Shares owned by the Schumacher Plan are considered to be beneficially owned by Mr. Schumacher. Mr. Schumacher's beneficial ownership also includes the following shares to be owned by certain relatives of Mr. Schumacher: 12 Owner Relationship Number of Shares Zona Schumacher Spouse 493 Jada Schumacher Daughter 512 Spencer Schumacher Son 512 Quinn Schumacher Son 512 Ralph and Alma Schumacher Parents 183 Roberta and Timothy Weiss Sister and her spouse 164 Constance and Gary Novak Sister and her spouse 164 Cynthia and Greg Becker Sister and her spouse 164 Katheryn and Ken Zeeb Sister-in-law and her spouse 164 Lowell and Ginett Janssen Brother-in-law and his spouse 329 Warren and Cathy Janssen Brother-in-law and his spouse 164 Rachel and Charles Paprocki Sister-in-law and her spouse 164 Total 3,525 Mr. Schumacher disclaims beneficial ownership of an additional 76,703 shares held by the Plan as collateral for promissory notes totaling approximately $275,000 including accrued interest at June 30, 1999. The promissory notes are nonrecourse, bear interest at 8% per annum and are totally due January 6, 2000. Failure to collect the note balances and accrued interest at that time would result in the Schumacher Plan obtaining ownership of the 76,703 additional shares. (2) Harold L. Morris individually owns 64,399 shares of RMPC. In addition, Harold L. Morris and his spouse, Connie Morris are the sole beneficiaries of the Harold L. Morris Profit Sharing Plan which owns 34,978 shares of RMPC. Applegates Landing I, a Harold L. Morris family partnership owns 24,299 shares. Professional Investors, a Utah Limited Partnership, of which Mr. Morris is a partner, owns 1,679 shares. Mr. Morris' beneficial ownership also includes the following shares owned by certain relatives: Owner Relationship Number of Shares Debra L. Morris Daughter 4,796 Gary A. Morris Brother 2,397 ----- Total 7,193 ===== Mr. Morris disclaims beneficial ownership of an additional 68,222 shares held by Mr. Morris, or entities controlled by him, as collateral for promissory notes, totaling approximately $251,000 including accrued interest at June 30, 1999. The promissory notes are nonrecourse, bear interest at 8% per annum and are totally due January 6, 2000. Failure to collect the note balances and accrued interest would result in Mr. Morris, or entities controlled by him, obtaining ownership of the additional 68,222 shares. 13 Section 16(a) Beneficial Ownership Reporting Compliance To the best knowledge of the Company, all beneficial ownership reports of officers, directors and holders of 10% of the Company's common stock have been filed on timely reports. Item 12. Certain Relationships and Related Transactions None during the year ended June 30, 1999. Item 13. Exhibits and Reports on Form 8-K None 14 INDEX TO FINANCIAL STATEMENTS ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS June 30, 1999 and 1998 Report of Independent Certified Public Accountants F-2 Consolidated Financial Statements: Consolidated Balance Sheets F-3 Consolidated Statements of Income F-4 Consolidated Statement of Changes in F-5 Stockholders' Equity Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 - F-11 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Rocky Mountain Power Co. Englewood, CO 80112 We have audited the accompanying consolidated balance sheets of Rocky Mountain Power Co. and Consolidated Subsidiaries as of June 30, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years ended June 30, 1999 and June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements, referred to above, present fairly, in all material respects, the financial position of Rocky Mountain Power Co. and Consolidated Subsidiaries as of June 30, 1999 and June 30, 1998, and the results of its operations, changes in stockholders' equity and its cash flows for the years ended June 30, 1999 and June 30, 1998, in conformity with generally accepted accounting principles. Miller and McCollom Certified Public Accountants 7400 W. 14th Avenue Lakewood, Colorado 80215 September 15, 1999 F-2 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS ------
June 30, June 30, 1999 1998 Current Assets: Cash $ 445,158 $ 70,229 Certificates of purchase, real estate foreclosures (Note 3) 197,247 799,801 Mortgage notes receivable, current portion (Note 3) 111,108 301,574 Mortgage note receivable, related party (Note 3) 139,079 139,079 Deferred income taxes receivable, current (Note 5) 4,626 4,626 Sale proceeds receivable (Note 7) 246,500 - Other 26,831 26,685 --------- --------- Total Current Assets 1,170,549 1,341,994 Real estate, net of accumulated deprec- iation of $5,500 at June 30, 1999 and $4,000 at June 30, 1998 (Note 3) 234,817 244,317 Transportation equipment, net of accumulated depreciation of $6,125 at June 30, 1999 and $3,125 at June 30, 1998 8,875 11,875 Mortgage notes receivable, net of current portion (Note 3) 795,356 814,010 Deferred income taxes receivable, net of current portion (Note 5) 53,557 57,213 --------- --------- TOTAL ASSETS $ 2,263,154 $ 2,469,409 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 8,158 $ 6,931 Notes payable, current portion (Note 2) 10,005 318,519 Income taxes payable (Note 5) 41,689 39,531 Deferred taxes payable, current portion (Note 5) 2,104 1,621 Accrued expenses and other 24,598 22,243 ------ ------- Total Current Liabilities 86,554 388,845 Deferred taxes payable, long term (Note 5) 27,595 35,906 Notes payable, net of current portion (Note 2) 18,872 28,109 ------- ------- TOTAL LIABILITIES 133,021 452,860 ------- ------- Stockholders' Equity: Preferred stock, $25.00 par value, 200,000 shares authorized, none issued & outstanding - - Common stock, $.05 par value, 100,000,000 shares authorized, 608,917 shares issued and outstanding at June 30, 1999 and 607,853 at June 30, 1998 30,446 30,393 Additional paid-in capital 1,614,435 1,610,988 Retained earnings 485,252 375,168 TOTAL STOCKHOLDERS' EQUITY 2,130,133 2,016,549 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,263,154 $ 2,469,409 =========== ===========
The accompanying notes are an integral part of the financial statements. F-3 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended Year Ended June 30, June 30, 1999 1998 Revenue: Rent income $ 7,960 $ 26,557 Interest income 150,261 157,838 Management fee income - 38,350 Gain on the sale of real estate 43,570 97,174 Other income 7,293 - -------- -------- 209,084 319,919 -------- -------- Expenses: Property management fees 660 15,591 Rent - 28,219 Depreciation 4,500 12,250 Interest 3,163 47,401 Real estate taxes and insurance 3,677 9,079 Repairs and maintenance 229 5,101 Professional fees 28,119 21,487 Stock issued for services 3,500 12,386 Other 14,902 30,876 ------- ------- 58,750 182,390 ------- ------- Net income before provision for income taxes 150,334 137,529 ------- ------- Provision for income taxes (Note 5): Current 41,686 39,531 Deferred (1,436) (2,515) ------- ------- 40,250 37,016 ------- ------- Net income $ 110,084 $ 100,513 -------- -------- Per Share $ .18 $ .14 ======== ======== Weighted Average Shares Outstanding 608,917 721,364 ======== ========
The accompanying notes are an integral part of the financial statements. F-4 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY From June 30, 1997 through June 30, 1999
Common Stock Paid-in Retained No./Shares Amount Capital Earnings Total ---------- ------ ------- ------- -------- Balance at June 30, 1997 $ 749,742 $ 37,487 $2,065,234 $274,655 $2,377,376 Common stock issued 3,873 194 12,192 - 12,386 Common stock cancelled (145,762) (7,288) (466,438) - (473,726) Net income for the year ended June 30, 1998 - - - 100,513 100,513 -------- ------- --------- ------- --------- Balance at June 30, 1998 607,853 30,393 1,610,988 375,168 2,016,549 Common stock issued 1,064 53 3,447 - 3,500 Net income for the year ended June 30, 1999 - - - 110,084 110,084 ------- -------- --------- -------- --------- Balance at June 30, 1999 608,917 $ 30,446 $1,614,435 $ 485,252 $2,130,133 ======= ======== ========= ======== =========
The accompanying notes are an integral part of the financial statements. F-5 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Year ended June 30, June 30, 1999 1998 Cash Flows Operating Activities: Net income $ 110,084 $ 100,513 Depreciation 4,500 12,250 Stock issued for services 3,500 - Increase in income taxes payable 2,158 23,371 (Decrease) in deferred income taxes payable (4,172) (2,515) Increase in accounts payable and accrued expenses 3,582 8,293 (Gain) on sale of assets - (78,947) -------- ------- Net Cash Provided by Operating Activities 119,652 62,965 -------- ------- Cash Flows from Investing Activities: (Increase) in sales proceeds receivable (246,500) - Collection of (Investments in) certificates of purchase 602,554 (233,224) Collection of notes receivable 485,666 564,554 (Investment) in mortgage notes receivable (276,546) (255,240) Disposition of real estate 8,000 37,877 Other (146) 154,273 -------- -------- Net Cash Provided by Investing Activities 573,028 268,240 -------- -------- Cash Flows from Financing Activities: Common stock issued and additional paid-in capital - 12,386 (Repayment) of notes payable (7,851) (1,282,793) Loan from bank 2,565,004 - (Repayment) of loan from bank (2,774,904) - (Repayment) of loan from related party (100,000) (150,000) --------- -------- Net Cash Provided by Financing Activities (317,751) (1,420,407) --------- --------- Increase (decrease) in Cash 374,929 (1,089,202) Cash, Beginning of Period 70,229 1,159,431 --------- --------- Cash, End of Period $ 445,158 $ 70,229 ========= ========== Interest Paid $ 3,163 $ 47,401 ========= ========== Income Taxes Paid $ 42,846 $ 16,122 ========= ==========
The accompanying notes are an integral part of the financial statements. F-6 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 and 1998 (1) Summary of Accounting Policies ------------------------------ This summary of significant accounting policies of Rocky Mountain Power Co. (RMPC) and its wholly-owned subsidiary, Prime Rate Income & Dividend Enterprises, Inc. (PRIDE) and Birch Branch, Inc., and GAP Enterprises, Inc., wholly-owned subsidiaries of PRIDE is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. (a) Organization and Principles of Consolidation -------------------------------------------- The consolidated financial statements include the accounts of the companies listed above. The Company is principally in the real estate ownership and rental business. The Company also invests in mortgage notes receivable and certificates of purchase related to real estate foreclosures. All intercompany account balances have been eliminated in the consolidation. The Company has selected June 30 as its year end. (b) Per Share Information --------------------- Per share information is based upon the weighted average number of shares outstanding during the period. (c) Investment in Real Estate and Related Depreciation -------------------------------------------------- The Company's investments in rental real estate are carried at cost, net of accumulated depreciation. Depreciation on rental real estate is being computed using the straight-line method over estimated useful lives of 40 years. Major renovations are capitalized. Repairs and maintenance costs are expensed as incurred. (d) Use of Estimates in the Preparation of Financial Statements ----------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-7 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 and 1998 (1) Summary of Accounting Policies, Continued ------------------------------------------ (e) Geographic Area of Operations and Interest Rates ------------------------------------------------ The Company owns properties principally in California, Nebraska, North Dakota, Florida and Arkansas. The potential for severe financial impact can result from negative effects of economic conditions within the market or geographic area. Since the Company's business is principally in four areas, this concentration of operations results in an associated risk and uncertainty. (f) Provision for Deferred Income Taxes ----------------------------------- Timing differences exist related to recognition of gains on sale of real estate for income tax purposes and financial reporting purposes. Income tax regulations allow the use of the installment method for reporting sales of assets. The Company has provided a deferred income tax provision for this timing difference. (2) Notes Payable ------------- As of June 30, 1999 the Company had outstanding $28,877 on a note payable bearing interest at 15%. Maturities of this note payable is summarized as follows: Year ending June 30, 2000 $ 10,005 2001 11,614 2002 7,258 2003 - Thereafter - Total $ 28,877 This note is due in monthly installments of $1,129 through December, 2002. This note is not collateralized by any assets of the Company. Also included in notes payable at June 30, 1998, was $209,900 payable to a bank collateralized by certain mortgage notes receivable and certificates of purchase. This note was paid in full during the year ended June 30, 1999. The terms of the bank loan are more fully disclosed in Note 6. In addition, the Company had a $100,000 note payable to a shareholder which was uncollateralized and was paid in full during the year ended June 30, 1999. F-8 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 and 1998 (3) Concentration of Credit Risk ---------------------------- The Company's material concentration of credit risk consists principally of investments in mortgage loans and certificates of purchase. The Company's investments in mortgage loans are collateralized principally by first or second deeds of trust on real estate located primarily in Colorado, Arizona and California. At June 30, 1999, the Company had seven mortgage loans receivable from one individual totaling approximately $87,243. The loans as a percentage of value were approximately 90% at the time of sale. The Company also had seventeen mortgage loans receivable from another individual totaling approximately $565,497. The second individual's loans as a percentage of value were approximately 100% at the time of sale but, as additional collateral for the loans receivable from this individual, the Company has a junior lien on another property owned by this individual. The weighted average interest rate on mortgagee notes receivable is approximately 8% per annum with monthly repayment terms being amortized over periods up to twenty years. The Company has one investment in a foreclosure certificate of purchase totaling $197,247 as of June 30, 1999. This certificate of purchase entitles the Company to receive interest at the original foreclosed mortgage loan rate over the redemption period, which is generally 75 days, or title to the property if not redeemed within the redemption period. The interest rate on the Company's investment in certificate of purchase was 30%. Subsequent to June 30, 1999, the Company obtained title to the property that was subject to the certificate of purchase. Effective March 31, 1998, the Company sold its investment in a health club/racquetball building to the shareholder that originally contributed the property for stock. The gross proceeds to the Company were 145,762 shares of the Company's common stock and a mortgage note receivable of $139,079 collateralized by the property. This note bears interest at 8% per annum and is totally due on March 31, 2000. The Company recognized a gain on this sale of $78,947. The shares of stock returned to the Company were recorded at net book value, cancelled and returned to authorized but unissued stock. F-9 Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of temporary cash investments. The Company places its temporary cash investments with financial institutions. As of June 30, 1999, the Company had a concentration of credit risk since it had temporary cash investments in bank accounts totalling $309,112 in excess of the FDIC insured amounts. ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 and 1998 (4) Fair Value Financial Instruments -------------------------------- As of June 30, 1999, the Company had various investments in long term mortgage notes receivable and was obligated under various mortgage notes payable. Management believes that the fair value of these financial instruments does not materially differ from the carrying value of these notes based upon discounting at current market rates of interest. (5) Income Taxes ------------- A reconciliation between the expected income tax provision computed at a federal statutory rate of 39% and the actual income tax provision follows: Year Year Ended Ended June 30, June 30, 1999 1998 Expected income tax $ 58,630 $ 53,636 Graduated tax brackets (16,750) (16,750) Benefit of utilization of net operating loss carryover (4,626) (4,626) State tax net of federal benefit 4,584 4,194 Other, net (1,588) 562 ------- ------- $ 40,250 $ 37,016 ======= ======= The tax effects of temporary differences that give rise to the deferred tax liability at June 30, 1999 follow: Installment sale reporting $ 29,699 less current portion (2,104) -------- $ 27,595 ======== The change in the deferred tax liability during the year ended June 30, 1999 was $8,311. As of June 30, 1999 RMPC had $58,183 of deferred tax assets related to net operating loss carryovers. RMPC had useable loss carryovers of approximately $200,000 at the time of the business combination, expiring in various years through the year 2017. Due to a change in ownership of RMPC the net operating loss carryover has been reduced from approximately $540,000 to approximately $200,000, of which $24,750 has been utilized by the Company since the change of ownership. F-10 ROCKY MOUNTAIN POWER CO. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 and 1998 (6) Notes Payable, Bank -------------------- As of June 30, 1999, the Company had a line of credit from a bank of $1,500,000. The Company's President has personally guaranteed the total $1,500,000 balance of the notes payable and has assigned to the bank a life insurance policy with a $500,000 death benefit as additional collateral. The Company has agreed to provide annual audited financial statements to the bank. The terms of the loan agreement require that the Company maintain a debt to tangible net worth ratio not to exceed one to one, a debt service coverage ratio of greater than 1.25 to one and a current ratio of greater than one to one. The line of credit is collateralized by certain real estate mortgage notes receivable and certificates of purchase, and bears interest at .5% over prime plus has an annual fee of .5% of the total amount of the line. The line of credit is subject to annual renewal and is due in December, 1999. At June 30, 1999, the Company had no outstanding borrowing on this line of credit. (7) Sale Proceeds Receivable ------------------------- Effective June 30, 1999, the Company sold a real estate property resulting in a receivable of $246,500. During July, 1999 the Company received the $246,500 in cash. (8) Year 2000 Compliance --------------------- The Company is aware of the issues associated with the programming code in existing computer systems as the year 2000 approaches. The Company has assessed these issues as they relate to the Company, and since the Company currently has no operating business and does not use any computers, and since it has no customers or supplier, it does not believe that there are any material year 2000 issues to disclose in this Report. F-11 SIGNATURES In accordance with Section 13 of 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) ROCKY MOUNTAIN POWER CO. (Date) September 22, 1999 By:(Signature) /s/ Michael L. Schumacher (Name and Title) Michael L. Schumacher President, Chief Executive Officer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated: Signature Capacity Date /s/ Michael L. Schumacher President, Chief Executive Officer 9/22/99 Michael L. Schumacher and Chief Financial Officer /s/ George A. Powell Vice President and Director George A. Powell James Phelps Secretary and Director James Phelps /s/ Robert S. Benham Director Robert S. Benham /s/ Peter Porath Director Peter Porath Director Robert F. Moreland Director Norman L. Horsfield 15 EX-27 2
5 This schedule contains summary financial information extracted from the balance sheet and statements of operations found on pages F-1 ex seq. of the Company's Form 10-K for the fiscal year ended June 30, 1999, and is qualified in its entierty by reference to such financial statements. YEAR JUN-30-1999 JUN-30-1999 445,158 0 554,835 0 0 1,170,544 255,317 11,625 2,263,154 86,554 0 608,917 0 0 0 2,263,154 0 209,084 0 58,750 0 0 3,163 150,334 40,250 0 0 0 0 110,084 .18 .18
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