U.S. Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen,
We are transmitting herewith Form 10-QSB for the quarter ended June 30, 2003
for Diversified Realty, Inc.
Diversified Realty, Inc.
s/D. Mellinger
D. Mellinger
Accountant
U.S. 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 June 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-2864
DIVERSIFIED REALTY, INC.
(Exact name of small business issuer as specified in its charter)
Montana 81-0268110
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59401
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(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.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at June 30, 2003
$.10 Par Value Common Stock 5,367,591 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
DIVERSIFIED REALTY, INC.
INDEX
JUNE 30, 2003
Page Number
PART I
Condensed Financial Statements:
Balance Sheet
June 30, 2003 2
Statements of Income and Comprehensive Income -
Three Months and Six Months Ended June 30, 2003 and 2002 3
Statements of Cash Flows -
Six Months Ended June 30, 2003 and 2002 4
Notes to Financial Statements 5
Management's Discussion and Analysis
of the Statements of Income 6
PART II
Other Information 7
Signatures 8
Certification 9-10
1
DIVERSIFIED REALTY, INC.
BALANCE SHEET
AS OF JUNE 30, 2003
ASSETS
Current Assets
Cash $ 2,254,704
Marketable Securities 3,386
Due From Parent Company 111,492
Prepaid Income Taxes 30,706
Total Current Assets 2,400,288
Property, Plant and Equipment, Net 181,001
TOTAL ASSETS $ 2,581,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 15,324
Total Current Liabilities 15,324
Stockholders' Equity
Common Stock - $.10 Par Value,
11,000,000 shares authorized,
5,375,000 shares issued 537,500
Additional Paid-In-Capital 1,929,408
Retained Earnings 99,928
Accumulated Other Comprehensive Income 2,007
Cost of Common Stock in Treasury (2,878)
Total Stockholders' Equity 2,565,965
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,581,289
See Notes to Financial Statements
2
DIVERSIFIED REALTY, INC.
STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For The Three Months For the Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Operating Revenues $ 22,433 $ 23,350 $ 44,163 $ 48,836
Operating Expenses 21,571 19,171 39,881 32,550
862 4,179 4,282 16,286
Income Tax Expense 3,599 800 1,724 10,550
Net Income $ 4,461 $ 4,979 $ 6,006 $ 26,836
Other Comprehensive Income (Loss)
Net of Income Taxes:
Unrealized Holding
Gains (Losses) 292 -- 328 --
Comprehensive Income $ 4,753 $ 4,979 $ 6,334 $ 26,836
See Notes to Financial Statements
3
DIVERSIFIED REALTY, INC.
STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 14,903 $ 18,255
Income Taxes Paid in Cash -- (50)
Net Cash Provided By
Operating Activities 14,903 $ 18,205
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of Treasury Stock (42) (43)
Net Cash Advances
From (To) Parent Company 2,641 4,700
Net Cash Provided (Used) By
Financing Activities 2,599 4,657
NET INCREASE (DECREASE) IN CASH 17,502 22,862
CASH - BEGINNING OF PERIOD 2,237,202 2,225,554
CASH - END OF PERIOD $2,254,704 $2,248,416
See Notes to Financial Statements
4
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003
In the opinion of management, all adjustments necessary (consisting of only
normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of June 30, 2003 and
the results of the Company's operations for the six months and three months
ended June 30, 2003 and 2002 and cash flows for the six months ended
June 30, 2003 and 2002.
The results of operations for the six months and three months ended
June 30, 2003 and 2002 are not necessarily indicative of the results to be
expected for the full year.
Parent -
M Corp, Great Falls, Montana owns approximately 95% of the outstanding shares
of the Company.
5
DIVERSIFIED REALTY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
June 30, 2003
A summary of the period to period changes in items included in the statements
of income is shown below.
COMPARISON OF
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2003 AND 2002 2003 AND 2002
Revenues $ (917) (3.9%) $ (4,673) (9.6%)
Expenses 2,399 12.5% 7,331 (22.5%)
Net Income (517) (10.4%) (20,830) (77.6%)
Revenues decreased $4,673 (9.6%)in the first six months of 2003 as compared
with the first six months of 2002 due primarily to a decrease in interest
revenues of $5,654 (38%). Interest revenues decreased due to a decrease in
interest bearing deposits and intereset rates earned by the company. Operating
expenses increased $7,331 (22.5%) in the first six months of 2003 as compared
with the first six months of 2002. The provision for income tax expense
increased$8,826 (83.7%) in the first six months of 2003 as compared with the
first six months of 2002, due to a change in the recording of income tax
provisions, excluding nontaxable income.
6
DIVERSIFIED REALTY, INC.
PART II
OTHER INFORMATION
JUNE 30, 2003
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DIVERSIFIED REALTY, INC.
Registrant
Date: August 1,2003 s/A. Semenza
A. Semenza,
Assistant
Secretary-Treasurer
Date: August 1, 2003 s/D. Mellinger
D. Mellinger,
Accountant
8
CERTIFICATION
I, Paul J. McCann, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Diversified Realty Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the quarterly report, fairly present in
all material respects the financial condition, results of operations
and cash flows of Diversified Realty, Inc. as of, and for, the
periods presented in this annual report.
4. Diversified Realty, Inc.'s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for Diversified Realty,
Inc. We have:
a. designed such disclosure controls and procedures to ensure that material
information relating to Diversified Realty, Inc. is made known to us
by others within those entities, particularly during the period in which
this quarterly report is being prepared.
b. evaluated the effectiveness Diversified Realty, Inc. disclosure controls
and prodecures as of a date with 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. Diversified Realty, Inc.'s other certifying officers and I have disclosed,
based on our most recent evaluation, to Diversified Realty, Inc. auditors
and the audit committee of Diversified Realty, Inc. board of directors
(or persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect Diversified Realty, Inc.'s
ability to record, process, summarize and report financial data, and
I have identified for Diversified Realty, Inc.'s auditors any
material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in Diversified Realty,
Inc.'s internal control; and
6. Diversified Realty, Inc.'s other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: August 1, 2003 s/Paul J. McCann
Paul J. McCann
9
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Diversified Realty, Inc. on Form
10-QSB for the period ending June 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Paul J. McCann,
Representative of Diversified Realty, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Subanes-
Oxley Act of 2002, that:
1. The report fully compiles with the requiremtns of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of Diversified Realty, Inc.
Date: August 1, 2003 s/Paul J. McCann
Paul J. McCann,
Representative
10