10QSB 1 rushmore10q33102.txt 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 March 31, 2002 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 300, Dallas, Texas 75240 ----------------------------------------------- 972-308-8858 ------------------------------------------------ (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 March 31, 2002: 7,901,684 shares of common stock, $0.01 par value. Transitional Small Business Disclosure Format; Yes ______ No XXX PART I. FINANCIAL INFORMATION Item 1. Financial Statements 2
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, ASSETS 2002 2001 -------------- -------------- Cash and cash equivalents $ 259,934 $ 261,761 Accounts receivable 179,477 338,747 Prepaid expenses and deposits 491,545 227,449 Developed software, at cost 1,925,070 1,739,257 Property and equipment, net of accumulated depreciation 373,816 413,598 Goodwill, net 1,253,932 1,253,932 -------------- -------------- Total assets $ 4,483,774 $ 4,234,744 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable $ 1,012,823 $ 1,012,529 Notes payable 328,151 150,154 Liabilities acquired in 2001 acquisition 349,318 375,812 Accrued expenses and other liabilities 170,448 136,751 -------------- -------------- Total liabilities 1,860,740 1,675,246 -------------- -------------- Shareholders' Equity: Preferred stock - cumulative; $10 par value; 14,063 shares issued and outstanding 140,630 140,630 Preferred stock - convertible cumulative; $10 par value; 86,480 shares issued and outstanding 864,800 864,800 Preferred stock subscriptions pending 65,000 -- Common stock - $0.01 par value, 10,000,000 shares authorized; 8,588,562 shares issued at March 31, 2002; 7,229,633 85,886 72,296 shares issued at December 31, 2001 Common stock subscriptions receivable (4,118) (4,118) Additional paid in capital 12,453,876 12,154,388 Treasury stock, at cost - 686,878 shares (421,022) (421,022) Accumulated deficit (10,562,018) (10,247,476) -------------- -------------- Total shareholders' equity 2,623,034 2,559,498 -------------- -------------- Total liabilities and shareholders equity $ 4,483,774 $ 4,234,744 ============== ==============
See accompanying notes to consolidated financial statements 3
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, (unaudited) 2002 2001 ------------- ------------- Revenue: Direct access brokerage services Commissions and fees $ 233,394 $ 52,634 Retail brokerage services Commissions and fees 1,399,970 1,370,591 Other revenue 12,662 37,672 ------------- ------------- Total revenue 1,646,026 1,460,897 ------------- ------------- Expenses: Direct access brokerage services Commission expense 183,645 1,760 Other direct access brokerage services expenses 145,352 109,964 Retail brokerage services Commission expense 1,062,037 950,112 Other retail brokerage services expenses 20,454 84,936 General and administrative 482,626 1,062,087 ------------- ------------- Total expenses 1,894,114 2,208,859 ------------- ------------- Operating loss (248,088) (747,962) Other income (expense): Depreciation and amortization (58,577) (51,966) Interest expense (7,877) (7,430) ------------- ------------- Loss from continuing operations (314,542) (807,358) ------------- ------------- Loss from discontinued operations -- (54,274) ------------- ------------- Net loss $ (314,542) $ (861,632) ============= ============= Basic and diluted loss per share of common stock, continuing operations $ (0.05) $ (0.16) Basic and diluted loss per share of common stock, discontinued operations -- (0.01) ------------- ------------- Basic and diluted net loss per share of common stock $ (0.05) $ (0.17) ============= ============= Weighted average common shares outstanding 6,705,239 5,159,047 ============= =============
See accompanying notes to consolidated financial statements 4
RUSHMORE FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, (unaudited) 2002 2001 ------------- ------------- Cash flows from operating activities: Loss from continuing operations $ (314,542) $ (807,358) Adjustments to reconcile loss from continuing operations to net cash used in operating activities Common stock issued for compensation and expenses 30,494 -- Depreciation and amortization 58,577 51,966 Change in assets and liabilities, net of effect of the 2001 acquisition: (Increase) decrease in assets: Accounts receivable 159,270 (229,390) Prepaid expenses and deposits 35,904 (33,413) Increase (decrease) in liabilities: Accrued expenses and other liabilities 7,497 353,581 ------------- ------------- Net cash used in operating activities-continuing operations (22,800) (664,614) ------------- ------------- Cash flows from investing activities: Purchase of equipment (18,795) (25,030) Capitalization of software development costs (185,813) (319,486) Cash received on the 2001 acquisition -- 11,047 ------------- ------------- Net cash used in investing activities (204,608) (333,469) ------------- ------------- Cash flows from financing activities: Proceeds from sale of Common Stock 390 (6,200) Proceeds from sale of Preferred Stock 65,000 -- Preferred Stock dividends paid (17,806) (10,769) Payments on notes payable (22,003) (42,479) Proceeds from notes payable 200,000 53,456 ------------- ------------- Net cash provided by (used in) financing activities 225,581 (5,992) ------------- ------------- Net cash used in continuing operations (1,827) (1,004,075) Net cash provided by discontinued operations -- -- ------------- ------------- Net decrease in cash and cash equivalents (1,827) (1,004,075) Cash and cash equivalents at beginning of period 261,761 1,218,317 ------------- ------------- Cash and cash equivalents at end of period $ 259,934 $ 214,242 ============= ============= Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 6,645 $ 5,370 Cash paid for income taxes $ -- $ -- Supplemental Disclosure of Non-Cash Information: Common stock issued as dividends on preferred stock $ 2,126 $ -- Common stock issued in the 2001 acquisition $ -- $ 679,800 Common stock issued in the OTA client acquisition $ 300,000 $ --
See accompanying notes to consolidated financial statements 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The financial statements included herein have been prepared by Rushmore Financial Group, Inc. ("Company" or "RFGI") 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 accounting principles generally accepted in the United States of America 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, 2001, included in the Company's annual report on Form 10-KSB for the year ended December 31, 2001. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. At March 31, 2002, the Company had $1,860,740 in liabilities, and cash and accounts receivable of $439,411. Also, the Company had net losses from continuing operations of $1,057,635 in 2000, $2,203,896 in 2001, and $314,542 in the first quarter of 2002. Although the Company believes that it will be able to continue to raise the necessary funds until it reaches a sustainable level of profitability, these matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 Retail Brokerage segment of the accompanying consolidated financial statements. 2. Industry Segment Information The Company's assets, revenue, and expenses are attributable to three identifiable business segments: Direct Access Brokerage Services, Retail Brokerage Services, and Corporate. The Direct Access Brokerage Services division, operating as "RushTrade(TM)", is being developed to meet the needs of the active on-line investor. RushTrade will offer two products to meet the needs of the active online investor, RushTrade Direct, its Level I browser-based product, and RushTrade Direct Pro, its Level II software-based product. Both products are in the final stages of beta testing, and are scheduled for final release in July 2002. The Retail Brokerage Services division consists of retail securities brokerage services, mutual fund distribution, variable life insurance and annuities sales and other financial services offered by Rushmore Securities Corporation ("Rushmore Securities"). In addition, Rushmore Investment Management Corporation ("Rushmore Management") provides fee-based investment advisory services and portfolio management. The Company's insurance services business selects and markets a wide range of life, disability, accident and health insurance and annuity products distributed through its registered representatives and independent agents of its affiliated agency, Rushmore Insurance Services, Inc. ("Rushmore Agency"). The Corporate division includes all business assets and activities not directly related or allocated to the other two divisions. The following summarizes the Company's identifiable assets by industry segment as of the dates indicated: March 31, ------------------------------ Identifiable Assets 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ 2,128,888 $ 961,692 Retail Brokerage 1,687,689 2,403,795 Corporate 667,197 792,504 ------------- ------------- Total $ 4,483,774 $ 4,157,991 ============= ============= 6 The following summarizes the Company's industry segment operating data for the periods indicated: Three Months Ended March 31, ------------------------------ Revenues 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ 233,394 $ 52,634 Retail Brokerage 1,412,624 1,385,412 Corporate 8 22,851 ------------- ------------- Total $ 1,646,026 $ 1,460,897 ============= ============= Three Months Ended March 31, ------------------------------ Expenses 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ 396,006 $ 212,201 Retail Brokerage 1,290,494 1,573,519 Corporate 274,068 482,535 ------------- ------------- Total $ 1,960,568 $ 2,268,255 ============= ============= Three Months Ended March 31, Income (Loss) from ------------------------------ Continuing Operations 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ (162,612) $ (159,567) Retail Brokerage 122,130 (188,107) Corporate (274,060) (459,684) ------------- ------------- Total $ (314,542) $ (807,358) ============= ============= 3. Capitalized Software Development Costs The Company capitalizes certain costs associated with the development of the RushTrade software products. During the first quarter of 2002, the Company capitalized $185,813 in costs versus $319,486 for the same period in 2001. As of March 31, 2002, the total of all capitalized costs was $1,925,070. Upon release of each of the RushTrade products or modules, costs related to that product or module will be charged to operating expenses instead of being capitalized. Additionally, all presently capitalized costs relating to a released product or module will be amortized by the greater of the revenue method or the straight-line method over a three-year period. 4. Recent Event In March 2002, the Company entered into an Agreement, as an amendment to an earlier revenue-sharing agreement, with NewportX.com, an affiliate of Online Trading Academy of Irvine, CA. ("OTA") to acquire a block of up to 150 active trader accounts which are to be referred or directed to RushTrade over the next six months in exchange for 1,200,000 shares of RFGI common stock. These shares were issued during March 2002 and the Company has recorded a prepaid asset of $300,000, the fair value of the stock on the date of issuance. As the active trader accounts are received, the Company will reclassify these amounts to an intangible asset. OTA is an education provider and conducts classroom training for those interested in day trading or other active investors who seek the latest investment tools and techniques in the active trader market. RushTrade has entered into a strategic relationship with OTA as an industry partner for training and education whereby OTA will conduct training classes using RushTrade's Direct Pro software trading platform. 5. Subsequent Event On April 9, 2002, RushTrade Software Services, Inc., a wholly owned subsidiary of the Company, entered into a non-binding Letter of Intent with Fidelity Asset Management co. of Huntington Beach, CA ("Fidelity") to license the RushTrade Direct Pro software. This Letter of Intent is subject to the execution of definitive documents, which are expected to require RushTrade to provide to Fidelity a co-branded "private label" version of the RushTrade Direct Pro software, which will include a customized graphical user interface modified for the Chinese language. The documents are also expected to provide for a 24-month exclusive territorial rights usage in Hong Kong and Mainland China, subject to the approval of various governmental officials or regulatory authorities. If the transaction is consummated, RushTrade is expected to receive an initial front-end license fee in the amount of $500,000 plus a monthly license fee. 7 6. Discontinued Operations In September 2001 the Company entered into an agreement, with an effective date of August 1, 2001, to sell Rushmore Investment Advisors, Inc. ("Rushmore Advisors") to Mr. John Vann in exchange for the redemption and cancellation of 597,405 shares of the Company's common stock plus a note for $200,000. As part of the sale, Mr. Vann also retained the right to prepay his existing note of $280,319 to the Company at a discount. Both notes were subsequently discounted to a total of $250,000 and paid. The sale, including the discounted note payoffs, resulted in a one-time non-operating loss of approximately $2,900,000 in September 2001. The financial data relating to Rushmore Advisors is classified as discontinued operations for all periods presented. 7. Reclassification Certain 2001 balances have been reclassified to conform to the 2002 presentation. 8. Earnings (Loss) Per Share Earnings (loss) per share for the periods indicated are computed using the following information: Three months ended March 31, ------------------------------ Loss From Continuing Operations 2002 2001 ------------------------------------------ ------------- ------------- Loss from continuing operations $ (314,542) $ (807,358) Dividends on preferred stock (19,932) (10,769) ------------- ------------- Loss from continuing operations applicable to common shareholders $ (334,474) $ (818,127) ============= ============= 9. Goodwill In July 2001 the FASB issued Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Intangible Assets, which revises the accounting for purchased goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives will no longer be amortized, but will be tested for impairment annually, and also in the event of an impairment indicator. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The elimination of the amortization of goodwill upon adoption of SFAS 142 is expected to reduce annual operating expenses by approximately $89,000. The Company adopted SFAS 142 on January 1, 2002. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1. Recent Development In March 2002 the Company's technology development subsidiary, RushTrade Software Services, Inc. entered into a non-exclusive agreement with CentraTrade Services, Ltd. of Houston whereby CentraTrade would become a licensee and distributor of RushTrade's RushTrade Direct and RushTrade Direct Pro software platforms to other NASD member broker/dealers. Upon the completion and final release of the RushTrade software and its associated Penson Back Office Administrative Tool, the Company expects to begin to derive various revenue streams in the form of licensing fees and royalties from these expected licensing arrangements. 2. RushTrade(TM)Direct Access Online Services Software Development RushTrade Direct Access Online Services--RushTrade.com (http://www.rushtrade.com), a division of Rushmore Securities, is being developed to meet the needs of the active on-line investor. RushTrade will offer its clients real-time Level I and Level II investment price quotes combined with direct access to Electronic Communications Networks ("ECN"s) and the major Exchanges. The RushTrade product is being developed by RushTrade Software Services, Inc., and will be deployed for retail distribution through RushTrade.com, a division of Rushmore Securities. The products offered by RushTrade.com are currently in beta testing, and is expected to ready for final release in July 2002. 8 RushTrade will offer two distinct products to meet the needs of the active online investor, RushTrade Direct, its Level I browser-based product, and RushTrade Direct Pro, its Level II software-based product. RushTrade Direct will fulfill the needs of the online investor by delivering real-time quotes and information, RushTrade's Direct Access Routing Technology (DART(TM)), and customer service provided by experienced registered representatives. This product will be delivered to investors via the Internet, and therefore will be able to be accessed from virtually any computer with a web browser. RushTrade Direct Pro, RushTrade's proprietary software-based Level II product, will meet the more sophisticated on-line investors' demands by providing the latest trading technologies and service available in an easy-to-use trading system. Significant features of the Level II product include streaming, real-time Level II securities quotes, news, charts, research, and RushTrades' proprietary Direct Access Routing Technology (DART(TM)). DART(TM) will enable investors to route their orders directly to the specific ECN or Exchange with the best market price, thus saving the investor time and money by providing improved trade execution quality. RushTrade Direct Pro clients will have access to the same customer service support that all RushTrade Direct users receive. The RushTrade products were released into various stages of testing during 2001-2002. Beta testing began for RushTrade Direct in July 2001. Beta testing for RushTrade Direct Pro began in November 2001, and again with additional features in February 2002. Both products are scheduled for final release in July 2002. RushTrade's Penson Back Office Administrative tool, a module necessary for licensing the software to other broker/dealers who have clearing arrangements with Penson Financial, is currently under development, and is expected to be ready for beta testing in May or June 2002. Final release of the module is expected to occur no sooner than July 2002. 2. Results of Continuing Operations Three Months Ended March 31, 2002 and 2001 Revenues The following table sets forth the components of the Company's revenues for the periods indicated: Three Months Ended March 31, ------------------------------ Revenues 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ 233,394 $ 52,634 Retail Brokerage 1,412,624 1,385,412 Corporate 8 22,851 ------------- ------------- Total $ 1,646,026 $ 1,460,897 ============= ============= Total revenue for the first quarter increased $185,129, or 13%, from 2001 to 2002. This increase was comprised primarily of increases of $180,760 from Direct Access Brokerage operations and $27,212 from Retail Brokerage operations, offset by a decrease of $22,843 in corporate revenue. Direct Access Brokerage revenue increased $180,760, or 343%, from 2001 to 2002. This increase was generally the result of $228,247 generated by a new trading firm customer licensed in late December 2001. Retail Brokerage revenue increased $27,212, or 2%, from 2001 to 2002. The increase consisted mainly of increases of $226,023 brokerage commission revenue, $105,164 in asset-based 12-b-1 fees, and $14,552 in other various products, offset by decreases of $158,577 in mutual fund commissions and $159,950 in life and health insurance products. The decrease in insurance revenue is primarily due to management's decision to reposition its insurance marketing resources and efforts to concentrate on the development and launch of its RushTrade direct access on-line trading system. Corporate revenue decreased primarily due to the decrease in interest income from 2001 to 2002, as interest-earning assets such as investments and notes receivable decreased. 9 Expenses The following table sets forth the components of the Company's expenses for the periods indicated: Three Months Ended March 31, ------------------------------ Expenses 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ 396,006 $ 212,201 Retail Brokerage 1,290,494 1,573,519 Corporate 274,068 482,535 ------------- ------------- Total $ 1,960,568 $ 2,268,255 ============= ============= Total expenses decreased $307,687 or 14%, from 2001 to 2002. Direct Access Brokerage expenses increased $183,805, while Retail Brokerage expenses decreased $283,025 and Corporate expenses decreased 43%, or $208,467. Direct Access Brokerage expenses increased $183,805, or 87%, from 2001 to 2002. This increase is primarily due to commissions of $183,645 paid to the new trading firm licensed in December. Retail Brokerage expenses decreased $283,025, or 18%, from 2001 to 2002. Commission expense increased $111,925. All other major categories of expenses decreased $394,950. Retail Brokerage commission expense increased 12%, from $950,112 to $1,062,037, although commissionable revenue increased only 6%, from $1,258,654 to $1,329,880. This is caused by two main reasons. Health insurance product sales, with average commission payout rates of 63%, declined from 13% of sales in 2001 to only 4% of sales in 2002. Average commission rates on other investment securities products rose from 77% in 2001 to 81% in 2002, as the Company focused on recruiting higher-producing representatives, who generally command higher commission payout rates. Other Retail Brokerage expenses decreased $394,940 from 2001 to 2002. After the Northstar acquisition in February 2001, the Company began to implement cost-reduction policies designed to consolidate job functions and eliminate duplicated expenses. These consolidation efforts are shown in decreases from 2001 to 2002 of $43,723 in insurance, $47,385 in office rent, $233,955 in salaries, $14,569 in payroll taxes, $8,114 in postage, and $45,218 in quote services. Corporate expenses decreased $208,467, or 43%, from 2001 to 2002, with the primary reason being the cost reduction policies implemented after the Northstar acquisition. Cost reduction amounts from 2001 to 2002 were $76,930 in salaries, $33,004 in office rent, $36,803 in general operating expenses, and $17,597 in legal expenses. Operating income (loss) from continuing operations The following table sets forth the components of the Company's income (loss) for the periods indicated: Three Months Ended March 31, Income (Loss) from ------------------------------ Continuing Operations 2002 2001 --------------------------- ------------- ------------- Direct Access Brokerage $ (162,612) $ (159,567) Retail Brokerage 122,130 (188,107) Corporate (274,060) (459,684) ------------- ------------- Total $ (314,542) $ (807,358) ============= ============= Operating losses declined $492,816, or 61%, from 2001 to 2002. Retail Brokerage recorded operating income of $122,130 in 2002 versus an operating loss of $188,107 in 2001. Corporate operating losses declined $185,624, or 40%, from 2001 to 2002. These operating loss reductions are generally attributable to the Company's continual efforts to control and reduce general and administrative expenses. 10 Liquidity Cash Flows from Operating Activities - The Company had a loss from continuing operations of $314,542 for the quarter ended March 31, 2002. This amount was adjusted for non-cash expenses totaling $89,071. Cash flows from operating activities were increased by a decrease in receivables of $159,270 and by various other cash flow adjustments aggregating a net source of cash of $43,401; thus yielding a net cash flow used by operating activities of $22,800. Cash Flows From Investing Activities - Cash flow used by investing activities during the quarter ended March 31, 2002 was $204,608, due to capitalizing $185,813 in development costs related to the RushTrade direct access software and purchasing various fixed assets for $18,795. Cash Flows from Financing Activities - During the quarter ended March 31, 2002, the Company raised $65,390 from the sale of common and preferred stock and $200,000 from borrowings. The Company paid $22,003 as payments on notes payable and $17,806 as preferred stock dividends. The Company's cash and cash equivalents available for operations at March 31, 2002 were $259,934, and the Company's liabilities exceeded its cash and receivables by $1,421,329. The Company's requirements for normal cash expenditures, as well as costs for the further development and launch of the proprietary on-line RushTrade software, have historically been supplemented with borrowings and equity capital raised through the private placement of securities; however, there can be no assurance that these sources of cash will be available in the future. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. At March 31, 2002, the Company had $1,860,740 in liabilities, and cash and accounts receivable of $439,411. Also, the Company had net losses from continuing operations of $1,057,635 in 2000, $2,203,896 in 2001, and $314,542 in the first quarter of 2002. Although the Company believes that it will be able to continue to raise the necessary funds until it reaches a sustainable level of profitability, these matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has taken several steps to increase cash by the use of borrowings and equity. In the first quarter of 2002 the Company raised $200,000 through the sale of convertible debentures and $65,000 from the sale of preferred stock. Early in April 2002, the Company signed a selling agreement with an institutional broker/dealer in Houston to complete the remaining amount, approximately $500,000, of the current preferred stock offering on a "best efforts" basis. The Company has undergone an extensive internal reorganization and reduction of staff to adjust to the current level of activity and has implemented additional steps to more closely monitor expenses. Additional marketing efforts are being implemented to enhance revenue and take advantage of the upcoming release of the RushTrade software products. The RushTrade products are still in beta testing, and have so far generated only minimal revenue. The Company is pursuing additional agreements similar to the OTA and Fidelity agreements (as discussed in Footnotes #4 and #5 of this document) to further increase revenue. 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 PART II. OTHER INFORMATION Item 5. Other Information The Company has been notified by the Nasdaq Stock Market that it has until August 13, 2002 to comply with its minimum continued listing requirement by maintaining a minimum closing bid price of $1.00 for at least 10 consecutive trading days. The Company has also been reminded by the Nasdaq Stock Market that, to comply with its minimum continued listing requirements, it must maintain a minimum balance of $2,500,000 in Shareholder's Equity and a minimum of $1,000,000 in market value in the public float. There can be no assurance that the Company will demonstrate compliance with these requirements in the future. Item 6. Exhibits and Reports on Form 8K On May 7, 2002, the Company appointed the accounting firm of King Griffin & Adamson P.C. as its independent auditors for the fiscal year ended December 31, 2002, and chose not to renew the engagement of Grant Thornton LLP, who served as the Company's independent auditors for the fiscal year ended December 31, 2001. Since January 1, 2000, the Company has not had any disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that would require disclosure in the current Report on Form 8-K. 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: May 15, 2002 By /s/ Howard M. Stein ---------------------------- Howard M. Stein Controller 12