UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM - 10QSB
[x] QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from ___________ to _________
Commission File Number: 1-15277
Rampart Capital Corporation
(Exact Name of Registrant as specified in its charter)
TEXAS 6159 76-0427502
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
700 Louisiana
Suite 2510
Houston, Texas
(Address of Principal Executive Office)
77002
(Zip Code)
713-223-4610
(Registrant's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) 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 to such filing requirements for the past 90 days.
Yes [x]
No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
As of July 24, 2001, the number of shares outstanding of the
registrant's only class of common stock was 2,905,143 after deducting
144,857 shares of common stock held in treasury.
Transitional Small Business Disclosure Format (check one):
Yes [ ]
No [x]
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements Page No.
Consolidated Balance Sheets at June 30, 2001
(Unaudited) and December 31, 2000 (Audited) . . . . . . . . .2
Unaudited Consolidated Statements of Operations for the
Three Months and Six Months ended June 30, 2000 and
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Unaudited Consolidated Statements of Cash Flows for
the Six Months ended June 30, 2000 and 2001. . . . . . . . . .4
Notes to the Unaudited Consolidated Financial Statements . . . . .5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . . . . .7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .10
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
RAMPART CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 2001 DECEMBER 31, 2000
--------------- -------------------
(UNAUDITED) (AUDITED)
ASSETS
Cash $ 717,787 $ 174,223
Purchased asset pools, net 1,945,991 2,156,214
Commercial ventures, net 7,767,688 8,237,288
Investment real estate 2,373,346 2,286,667
Notes receivable from related parties 516,721 489,901
Notes receivable project financing 9,109,523 3,502,622
Property and equipment, net 466,319 518,861
Other assets 579,140 256,300
Minority interest 201,624 83,298
--------------- -------------------
Total assets $ 23,678,l39 $ 17,705,374
--------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 11,660,417 $ 7,259,332
Notes payable to related parties 668,990 -
Accounts payable and accrued expenses 759,666 1,048,254
Deferred tax liability 229,000 279,000
--------------- -------------------
Total liabilities 13,318,073 8,586,586
--------------- -------------------
Commitments and contingencies
Stockholders' equity
Preferred Stock, $0.01 par value; 10,000,000
shares authorized; none issued. - -
Common stock, $0.01 par value; 10,000,000
shares authorized; 3,050,000 shares issued. 30,500 30,500
Paid-in-capital 6,194,255 6,194,255
Retained earnings 4,513,810 3,272,532
Treasury stock, 144,857 shares, at cost (378,499) (378,499)
--------------- -------------------
Total stockholders' equity 10,360,066 9,118,788
--------------- -------------------
Total liabilities and stockholders' equity $ 23,678,139 $ 17,705,374
--------------- -------------------
1
RAMPART CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------ ------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net gain on collections on asset pools $ 344,617 $ 199,081 $ 672,338 $ 432,584
Investment real estate income 774,060 14,698 1,953,560 27,498
Commercial ventures income 836,776 563,599 1,569,716 923,359
Project financing income, net 228,320 51,544 334,448 70,101
Other income (expense) 6,807 (5,031) 6,991 20,991
----------- ----------- ----------- -----------
Total revenue 2,190,580 823,891 4,537,053 1,474,533
Costs of real estate sales 359,674 47,470 1,163,288 47,470
Operating and other costs 535,792 524,522 943,664 948,774
General and administrative expenses 476,830 564,922 1,081,012 1,137,303
Interest expense 160,006 12,459 276,139 23,650
Minority interests (24,532) - (118,328) -
----------- ----------- ----------- -----------
Total operating expense 1,507,770 1,149,373 3,345,775 2,157,197
----------- ----------- ----------- -----------
Net income (loss) before income tax benefit 682,810 (325,482) 1,191,278 (682,664)
Income tax benefit 25,000 - 50,000 23,000
----------- ----------- ----------- -----------
Net income (loss) $ 707,810 $ (325,482) $1,241,278 $ (659,664)
----------- ----------- ----------- -----------
Basic net income (loss) per common share $ 0.24 ($0.11) $ 0.43 ($0.22)
----------- ----------- ----------- -----------
Diluted net income (loss) per common share $ 0.24 ($0.11) $ 0.43 ($0.22)
----------- ----------- ----------- -----------
Average common shares outstanding 2,905,143 2,999,458 2,905,143 2,978,112
----------- ----------- ----------- -----------
2
RAMPART CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 1,241,278 $ (659,664)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation 100,424 76,793
Asset pool costs deducted in net gain on collections 222,371 194,514
Change in loan loss reserve (13,063) (41,789)
Cost of real estate 1,163,288 54,574
Other costs capitalized (4,362) (109,630)
Minority interests (118,328) -
Changes in operating assets and liabilities:
Other assets (322,840) (88,246)
Accrued interest income (153,176) (66,565)
Accrued net income from joint venture (10,307) -
Accounts payable and accrued expenses 38,332 (56,392)
Accounts payable to related parties (326,919) -
Accrued interest expense 73,181 -
Deferred tax liability (50,000) -
------------ ------------
Net cash provided (used) by operating activities 1,839,879 (696,405)
------------ ------------
Cash flows from investing activities:
Purchase of commercial real estate (40,229) (4,338,498)
Reimbursed costs previously capitalized 112,270 -
Purchase of investment real estate (953,227) (5,896)
Proceeds from notes receivable from related parties 618 1,610
Distributions from equity investments 66,554 -
Purchase of notes receivable (8,271,744) (2,453,125)
Proceeds from notes receivable 2,790,581 30,303
Purchase of treasury stock - (193,845)
Purchase of asset pools (678) (6,647)
Proceeds from purchased assessments 5,596 17,285
Purchase of property and equipment (3,311) (196,926)
------------ ------------
Net cash used by investing activities (6,293,210) (7,145,739)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable to related parties 660,000 -
Proceeds from notes payable 7,663,007 6,559,890
Payments on notes payable (3,326,112) (1,131,090)
------------ ------------
Net cash provided by financing activities 4,996,895 5,428,800
------------ ------------
Net increase (decrease) in cash 543,564 (2,413,344)
Cash at beginning of period 174,223 2,741,787
------------ ------------
Cash at end of period $ 717,787 $ 328,443
------------ ------------
Supplemental cash flow information:
Cash paid for interest $ 202,958 $ 23,650
------------ ------------
3
RAMPART CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim financial information
-------------------------------
The accompanying unaudited financial statements have been prepared
without audit in accordance with accounting standards generally
accepted in the United States of America for interim financial
information on a basis consistent with the annual audited consolidated
financial statements and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. The results
of operations of interim periods are not necessarily indicative of
results to be expected for an entire year. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
and disclosures considered necessary for a fair presentation of the
results of operations and cash flows for the periods presented have
been included. The consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial
statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2000.
Principles of Consolidation
-----------------------------
The consolidated financial statements include the assets of Rampart
Capital Corporation and its wholly owned subsidiaries. The Company
owns a 51% interest in a partnership that is reported using the full
consolidation method. The consolidated financial statements of the
Company include 100% of the assets and liabilities of the partnership
and the ownership interests of minority participants are recorded as
minority interest.
In March and June of 2001 the company sold a one-half ownership
interest in a majority of its residential lots and acreage within the
Newport project to a Canadian development and investment company. The
project is being reported as a joint venture between Rampart and the
Canadian company using the equity method of accounting. All material
intercompany balances have been eliminated.
Project Financing
------------------
Revenues from project financing are reported net of direct financing
costs, primarily interest expense, associated with the financing of
each project. The gross project financing revenues and financing costs
for the six months ending June 30, 2001 and 2000 are as follows:
Six Months Ended
June 30,
2001 2000
---------------------
Gross project financing revenues $ 572,692 $124,850
Less: Financing costs (238,244) (54,749)
---------- ---------
Project financing income, net $ 334,448 $ 70,101
---------- ---------
Other income
-------------
Other income is comprised of investment income and miscellaneous
revenue. Other income is recognized as earned.
Reclassifications
-----------------
Certain reclassifications have been made to the 2000 financial
statements to conform to the 2001 presentation. Financing costs
incurred in financing projects are reported as reductions in project
financing revenues, whereas in 2000 these financing costs had been
reported as interest expense. These reclassifications had no effect on
the 2000 net loss or stockholders' equity.
4
RAMPART CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE 2 - NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share has been computed for all periods
presented and is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each
period. There are no common stock equivalents resulting from dilutive
stock purchase warrants or options, thus basic and diluted earnings
(loss) per share are the same for all periods presented.
NOTE 3 - ACQUISITIONS
On January 7, 2000, the Company finalized the acquisition of a 51%
interest in Greater Houston Gulf Partners, LTD (the "Partnership). The
Partnership was formed to acquire, own, and manage a condominium
redevelopment project (the "Project"). In connection with the
Project's initial acquisition, the Company made a loan to the
Partnership for $1.1 million to provide financing for the acquisition
of the Project. The balance of the Project purchase price and
developmental funds were provided to the Partnership by a bank loan in
the amount of $2.9 million and additional loans of $700,000 by the
partners.
NOTE 4 - SEGMENT REPORTING
The Company operates in four business segments: (i) purchased asset
pools, (ii) commercial ventures, (iii) investment real estate, and
(iv) project financing. The purchased asset pools segment involves the
acquisition, management, servicing and realization of income from
collections on or sales of portfolios of undervalued financial assets,
and in some instances real estate the Company may acquire as part of
an asset pool or foreclosing on the collateral underlying an acquired
real estate debt. The commercial ventures segment involves holding
foreclosed and acquired improved real estate for appreciation and the
production of income. The investment real estate segment involves
holding foreclosed and acquired unimproved real estate for future
appreciation and acquiring unimproved real estate in conjunction with
short-term funding for developers. The project financing segment is
comprised of short-term financing of real estate at high yields and
real estate notes held by the Company from financing the sale of
Company assets. The notes are fully secured by real estate or other
collateral. "Unallocated" represents activities that are general
corporate in nature and do not relate specifically to any one segment.
Unallocated segment assets are comprised of cash, a related party note
receivable, prepaid assets and property and equipment. Unallocated
revenue is comprised of interest income generated from overnight money
market invested funds and miscellaneous other income. Financial
information by reportable operating segment is as follows:
5
As of and for the Six months ended June 30, 2001
----------------------------------------------------------------------------------
Purchased Commercial Investment Project
Asset Pools Ventures Real Estate Financing Unallocated Totals
------------ ------------ ------------- ---------- ------------- ------------
Revenue $ 672,338 $ 1,569,716 $ 1,953,560 $ 334,448 $ 6,991 $ 4,537,053
Segment profit (loss) 476,526 (304,557) 882,727 317,580 (180,998) 1,191,278
Identifiable assets 1,945,991 8,191,902 2,373,346 9,623,357 1,543,543 23,678,139
Depreciation and amortization - 91,247 - - 9,177 100,424
Capital expenditures - 40,227 - - 3,311 43,538
Investment in segment assets 678 - 953,227 5,200,000 - 6,153,905
Interest expense 106 198,441 34,640 - 42,952 276,139
As of and for the Six months ended June 30, 2000
----------------------------------------------------------------------------------
Purchased Commercial Investment Project
Asset Pools Ventures Real Estate Financing Unallocated Totals
------------ ------------ ------------- ---------- ------------- ------------
Revenue $ 432,584 $ 923,359 $ 27,498 $ 70,101 $ 20,991 $ 1,474,533
Segment profit (loss) 107,177 (627,638) (52,852) 62,407 (171,758) (682,664)
Identifiable assets 2,283,830 8,371,849 1,986,749 3,325,490 548,683 16,516,601
Depreciation and amortization - 67,582 - - 9,211 76,793
Capital expenditures - 4,503,100 - - 33,325 4,536,425
Investment in segment assets 6,647 - 115,526 2,453,125 - 2,575,298
Interest expense - 23,650 - - - 23,650
6
RAMPART CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
Revenues increased $3,062,520 from $1,474,533 during the six months ending June
30, 2000 to $4,537,053 during the first half of 2001. The increase in revenues
consisted of growth in commercial ventures revenues of $646,357, in investment
real estate revenues of $1,926,062, in project financing revenues of $264,347,
and in net gain on collections on asset pools of $239,754, which increases were
partially offset by a decrease in unallocated revenues of $14,000. The increase
in commercial ventures revenues of $646,357 was primarily due to increases of
approximately $130,000 at the Newport Golf Club and Conference Center
operations, of approximately $56,000 in rentals from our Dallas and San Antonio
retail centers, and of approximately $460,000 in residential unit sales from the
condominium redevelopment project. The increase in investment real estate
revenues of $1,926,062 was mainly due to the sale of a 50% ownership interest in
768 residential lots and 8 tracts of land within the Newport project to a
Canadian development and investment company and the sale of 12 additional lots
to a local real estate developer, for which there were no corresponding sales in
the first six months of 2000. The increase in revenues for project financing of
$264,347 was due to increased lending activity combined with a wider spread
between our cost of capital and our lending rates on financing projects. On
June 30, 2001, we had $9,604,382 in project loans compared to $3,793,136 on June
30, 2000. Revenues from net gain on collections on asset pools increased by
$239,754 in the first half of 2001 compared to the same period in 2000 because
of higher collections activity in that segment.
Costs of real estate sales were $1,115,818 higher in the six-month period ending
June 30, 2001 compared to the same period in 2000. The primary reason for this
increase was the cost of investment real estate sold from the Newport project of
$795,332 during the first six months of 2001 compared to no cost of sales of
investment real estate in the corresponding period in 2000. The cost of
commercial real estate sold by the condominium project in the current period was
$320,486 higher than in the first six months of 2000. The cost of commercial
real estate sold in the first six months of 2001 was $367,956 compared to only
$47,470 in the same period in 2000.
Operating and other costs decreased by $5,110 from $948,774 during the six
months ending June 30, 2000 to $943,664 for the same period in 2001. Costs of
operations at Newport decreased by $86,074 during the first half of 2001
compared to the same period in 2000. The decrease in operational and other
costs at Newport Golf Club and Conference Center was primarily due to increased
operating efficiencies resulting from the discontinued use of an outside
management company in favor of internal management. These decreases in
operational and other direct costs at Newport Golf Club and Conference Center
occurred even with increases in revenues of $130,517 from the first half of 2001
compared to the same period in 2000. Operating and other costs increased at the
condominium project by $77,715 from $7,104 for the six months ended June 30,
2000 to $84,819 for the period ended June 30, 2001. The condominiums were being
redeveloped during the first half of 2000 and were available for sale during
2001. All other operating and other costs increased by $3,249 during the first
half of 2001 as compared to the same period in 2000.
General and administrative expenses ("G&A") decreased $56,291 from $1,137,303 in
the first six months of 2000 to $1,081,012 in the same period of 2001. The
decrease was almost entirely due to the reversal of accrued homeowners'
assessments in the amount of $59,327 at the condominium redevelopment project.
The project's homeowners' association cancelled the assessments as a result of
flooding and subsequent inhabitability of the condominium. The condominium
units are being restored through the use of flood insurance proceeds provided by
the homeowners' association. Monthly assessments are expected to be reinstated
after the flood restoration is completed.
Interest expense increased $252,489 from $23,650 in the first half of 2000 to
$276,139 for the same period in 2001. This increase in interest expense was
almost entirely attributable to the condominium redevelopment project, which
reported an interest expense increase of $257,388. The increased interest from
the condominium project was the result of capitalizing the interest costs during
the construction period during 2000 through September of that year, and
expensing interest in 2001.
Minority interests expense reduced total operating expenses by $118,328 for the
six months ended June 30, 2001 with no corresponding expense reported for the
comparable 2000 period. Minority interests expense represents the minority
partners' share of the condominium redevelopment project's revenues and
expenses. Minority interest expense did not occur during the first six months
of 2000 because the construction phase of the condominium project was not yet
complete at June 30, 2000.
Our net income before income taxes increased $1,873,942 from a loss of
$(682,664) during the first half of 2000 to net income of $1,191,278 for the
same period in 2001. The increased income consisted of $323,081 from commercial
ventures, $935,579 from investment real estate, $255,173 from project financing
activities, and $369,349 from net gain on collections on asset pools. There was
a decrease of $(9,240) in net income before income taxes from revenues and
expenses not allocated in any specific segment. Higher net income before income
taxes in the commercial venture segment primarily resulted from a smaller loss
7
from Newport Golf Course and Conference Center of approximately $375,000. The
increase from investment real estate was due primarily to increased sales of
residential lots and tracts of land from the Newport project, which resulted in
higher net income before income taxes of approximately $992,000. The increased
net income from the project financing segment was due to increased loan
activity. The increase in net income from net gains on collections on asset
pools was mainly due to increased collection activities and lower allocated
costs charged to expense for asset pools collected.
Income tax benefit was $23,000 in 2000 compared to $50,000 in 2001. We have
available a significant net operating loss carryforward which was primarily
generated from the acquisition of certain corporate subsidiaries and assets of
MCorp Trusts. Due to the availability of net operating loss carry forwards and
other net deferred tax assets, we offset our taxable income during 2000 and 2001
and adjusted its valuation allowance accordingly.
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
Revenues increased $1,366,689 from $823,891 during the three months ending June
30, 2000 to $2,190,580 during the second quarter of 2001. The increase in
revenues consisted of growth in commercial ventures revenues of $273,177,
investment real estate revenues of $759,362, project financing revenues of
$176,865, net gain on collections on asset pools of $145,536, and other income
of $11,749. The increase in commercial ventures revenues was primarily due to
increased revenues from Newport of $84,871, from the condominium project of
$171,547, and from the Dallas and San Antonio retail centers of $16,760. The
increase in investment real estate revenues was mainly due to the sale of
residential lots and tracts of land in 2001 of $751,842 for which there were no
corresponding sales during the second quarter of 2000. Project financing net
revenues were up due to higher lending levels during the second quarter of 2001
compared to the same quarter in 2000. The increase in net gain on collections
on asset pools was principally due to the timing of collections in normal
business operations.
Cost of real estate sales increased by $312,204 from $47,470 for the three
months ending June 30, 2000 to $359,674 for the same period in 2001. The
increase consisted of $102,450 higher costs of residential units sold by the
condominium project and an increased cost of investment real estate sales at
Newport of $209,754 during the second quarter of 2001 for which there were no
corresponding sales in the same quarter of 2000.
Operating and other costs increased by $11,270 from $524,522 incurred during the
quarter ending June 30, 2000 and $535,792 for the same period in 2001. During
the second quarter of 2001, the operating and other costs at Newport Golf Course
and Conference Center decreased by $27,672 while the operating costs at the
condominium redevelopment project increased by $38,942 due to additional sales
activity during the second quarter of 2001 as compared to the second quarter of
2000.
General and administrative expenses ("G&A") decreased $88,092 from $564,922 in
the second quarter of 2000 to $476,830 in the same period of 2001. The decrease
was almost completely due to the reversal of accrued homeowners' assessments in
the amount of $59,327 at the condominium redevelopment project. The project's
homeowners' association cancelled the assessments as a result of flooding and
subsequent inhabitability of the condominium units. These units are being
restored through the use of flood insurance proceeds provided by the homeowners'
association. Monthly assessments are expected to be reinstated after the flood
restoration is completed. The remainder of the decrease is predominantly
explained by a decrease in portfolio review and asset investigative research
expense of approximately $13,000.
Interest expense increased by $147,547 from $12,459 to $160,006 during the
second quarter of 2001 as compared to the same period in 2000. This increase
was almost entirely attributable to the condominium project where the interest
expense during the second quarter of 2001 was $144,877 with no corresponding
interest expense during the same quarter of 2000. All interest expense incurred
by the condominium redevelopment project was capitalized into the cost of the
condominium units until construction was complete in September 2000.
Minority interests expense reduced total operating expenses by $24,532 during
the second quarter of 2001. There was no minority interests expense during the
second quarter of 2000. Minority interests expense represents the minority
partners' share of the condominium redevelopment project's revenues and
expenses. Minority interest expense did not occur during the second quarter of
2000 because the construction phase of the condominium project was not yet
complete at June 30, 2000.
The net income before income taxes increased $1,008,292 from a net loss of
$(325,482) during the second quarter of 2000 to a net income of $682,810 for the
same period in 2001. The increased net income consists of $198,036 from
commercial ventures, $454,031 from investment real estate, $168,171 from project
financing, $218,566 from net gain on collections on asset pools, which increases
were partially offset by an increased loss from unallocated profits of
$(30,512). The increased net income before income taxes on commercial ventures
was primarily due to reduced losses of $215,365 from Newport Golf Course and
Convention Center during the second quarter of 2001 as compared to the same
period in 2000. The condominium redevelopment's loss increased by $22,604 in
the second quarter of 2001 over the second quarter of 2000, which loss was
offset by the Dallas and San Antonio retail centers increased earnings of
$19,231. The $474,303 increase in earnings from investment real estate was
primarily due to sales in 2001 for which there were no recurring sales in 2000.
The increase in earnings from project financing and net gain on collections on
asset pools were related to increased activities in both segments.
8
Income tax benefit was $25,000 in the second quarter of 2001 compared to no
income tax benefit recorded in the second quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
We had cash and cash equivalents of $717,787 at June 30, 2001 compared to
$174,223 at December 31, 2000.
During 2001, we continued to invest a substantial portion of our cash reserves
in various projects, most notably was a $5.2 million investment in several
short-term bridge financing loans. This short-term bridge financing of real
estate are high yield loans and are fully secured by real estate or other
collateral. Cash flow from financing activities during the first half of 2001
was $5.0 million. Part of our financing consisted of several first lien notes
totaling $3.8 million at a prime plus 2% to prime plus 2.5% interest rate from a
national lending institution and $660,000 in second lien notes from related
parties bearing 18% interest, with both the first and second lien notes secured
by the real estate secured loans we originated. The remainder of the financing
consisted of $2.1 million in draws against our revolving credit facility, of
which $700,000 was used to provide secured bridge financing loans with the
balance used to purchase additional lots at Newport and to provide general
working capital to fund operations.
Due to the capital-intensive nature of our business, we have experienced, and
expect to continue to experience substantial working capital needs. Future cash
flows from operations and future borrowings available under our revolving credit
facility will be sufficient to fund our capital expenditures and working capital
requirements, as they currently exist. However, demand for our real estate
secured bridge financing exceeds our availability from current sources.
On June 30, 2001, we renewed our revolving credit facility to mature on December
31, 2001. This revolving credit facility is secured by notes receivable and
real estate in purchased asset pools, commercial and investment real estate,
notes receivable from project financing, and equipment. Principal is payable at
maturity with interest payable monthly at the bank's prime rate plus 1.0% per
annum (7.75% and 10.50% as of June 30, 2001 and December 31, 2000,
respectively). Management is negotiating with other financial institutions to
increase the amount of credit facilities available. The revolving credit
facility provides for certain financial covenants. As of the filing date of
this quarterly report, we are in compliance with these covenants.
STOCK REPURCHASES
On January 11, 2000, the Board of Directors approved a stock repurchase plan
under Rule 10b-18 promulgated under the Securities Exchange Act of 1934, for the
purchase of up to $2.0 million worth of our outstanding common stock in open
market transactions. Acquired shares will be held as treasury stock, and will
be available for future acquisitions and financing or for awards granted under
our 1998 Stock Compensation Plan. As of June 30, 2001, we had acquired 144,587
shares at a total cost of $378,499 or $2.62 per share. We intend to continue
repurchasing shares subject to SEC restrictions and the American Stock Exchange
continued listing requirements.
FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-QSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this report including,
without limitation, statements regarding our business strategy, plans,
objectives, expectations, intent, and beliefs of management for future
operations are forward-looking statements. Such statements are based on certain
assumptions and analyses made by our management in light of their experience and
their perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. The
forward-looking statements included in this report are also subject to a number
of material risks and uncertainties. Important factors that could cause actual
results to differ materially from our expectations include (1) tightening of the
credit markets, (2) volatility in the real estate markets and interest rates,
(3) emerging competition, (4) changes in regulations in the industries we serve,
and (5) general economic declines, particularly within the regions in which we
operate. Forward-looking statements are not guarantees of future performance
and actual results, as developments and business decisions may differ from those
contemplated by such forward-looking statements.
9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held June 29, 2001, the shareholders
elected the six persons nominated for election to the Company's Board of
Directors and ratified the selection of Pannell Kerr Forster of Texas, P.C. as
our independent public auditors. The results of the election were as follows:
1. Election of Directors
Number of Shares Voted
-----------------------------
Name and Nominee For Against Abstained
- ----------------------------------- --------- ------- ---------
Charles W. Janke 2,859,513 18,600 27,030
J. H. (Jim) Carpenter 2,859,513 18,600 27,030
James W. Christian 2,859,513 18,600 27,030
James J. Janke 2,859,513 18,600 27,030
Robert A. Shuey, III 2,859,513 18,600 27,030
William F. Mosley 2,859,513 18,600 27,030
2. Ratification of Independent Auditors
Number of Shares Voted
-----------------------------
Name of Accounting Firm For Against Abstained
- ----------------------------------- --------- ------- ---------
Pannell Kerr Forster of Texas, P.C. 2,877,013 1,100 27,030
- ----------------------------------- --------- ------- ---------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See "Index of Exhibits" below which lists the documents filed as
exhibits herewith.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
ended June 30, 2001.
10
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Rampart Capital Corporation
By: /s/ C. W. JANKE August 13, 2001
C. W. Janke
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
By: /s/ J. H. CARPENTER August 13, 2001
J. H. Carpenter
President
Chief Operating Officer
By:/s/ CHARLES F. PRESLEY August 13, 2001
Charles F. Presley
Vice-President
Chief Financial Officer
Treasurer
(Principal Financial Officer)
11
RAMPART CAPITAL CORPORATION
EXHIBITS TO FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX OF EXHIBITS
EXHIBIT
NO. DESCRIPTION
--- -----------
3.1 Restated Articles of Incorporation (Exhibit 3.1 to Rampart's
Registration Statement on Form SB-2 (Reg. No. 333-71089) and
incorporated herein by reference).
3.2 Bylaws (Exhibit 3.2 to Rampart's Registration Statement on Form SB-2
(Reg. No. 333-71089) and incorporated herein by reference).
4.1 Form of Warrant Agreement Between Rampart and American Stock Transfer
and Trust Company (Exhibit 4.1 to Rampart's Registration Statement on
Form SB-2 (Reg. No. 333-71089) and incorporated herein by reference).
4.2 First Amendment of Warrant Agreement (Exhibit 4.1 to Rampart's Form
8-K filed April 12, 2001 (File No. 1-15277) and incorporated herein by
reference).
*10.3 Eleventh Amendment to Loan Agreement with Southwest Bank of Texas N.
A., amended June 30, 2001.
_______________________________
* Filed herewith.
12