<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the three months Commission file number
ended March 31, 1996 33-80855
GATEWAY BANCSHARES, INC
(Name of small business issuer in its charter)
Georgia 58-2202210
(State of Incorporation) (I.R.S. Employer Identification No.)
5102 Alabama Highway, P. O. Box 129
Ringgold, Georgia 30736
(Address of principal executive offices)
(706) 965-5500
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 No X
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: One (1)
Transitional Small Business Disclosure Format: Yes No X .
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TABLE OF CONTENTS
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Page number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis or Plan of Operation. . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
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Part I - Financial Information
Item I - Financial Statements
GATEWAY BANCSHARES, INC.
(a development stage company)
BALANCE SHEET
(unaudited)
MARCH 31, 1996
ASSETS
<TABLE>
<S> <C>
Cash $ 3,473
Premises and equipment, net 24,225
Other intangible assets:
Organization costs 61,966
Stock opening costs 28,313
--------
Total Assets $117,977
========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Liabilities:
Accrued interest $ 1,102
Note payable - to organizers 40,500
Note payable to Bank 130,500
--------
Total Liabilities 172,102
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Stockholder's equity (deficit):
Common stock ($5 par value; 10,000,000 shares
authorized, 1 share issued and outstanding) 5
Capital surplus 5
Deficit accumulated during the pre-opening stage (54,135)
--------
Total stockholder's deficit (54,125)
--------
Total Liabilities and Stockholder's Deficit $117,977
========
</TABLE>
See notes to financial statements.
3
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GATEWAY BANCSHARES, INC.
(a development stage company)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the Period
Three months July 11, 1995
ended (inception) to
March 31, 1996 March 31, 1996
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<S> <C> <C>
Revenue: $ 0 $ 0
Expenses:
Personnel expense $ 41,584 41,584
Occupancy expense 5,206 5,206
Interest expense 1,371 1,626
Other pre-opening expenses 4,217 5,719
-------- --------
Net loss $(52,378) $(54,135)
======== ========
Net loss per common share
(based on 1 shareoutstanding) $(52,378) $(54,135)
======== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
GATEWAY BANCSHARES, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
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<CAPTION>
For the Period
Three months July 11, 1995
ended (inception) to
March 31, 1996 March 31, 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (52,378) $ (54,135)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Increase in accounts payable and accrued expenses 847 1,102
Increase in organization costs (5,030) (61,966)
Increase in deferred stock offering costs (13,937) (28,313)
--------- -----------
NET CASH USED BY OPERATING ACTIVITIES (70,498) (143,312)
--------- -----------
NET CASH USED IN INVESTING ACTIVITIES:
Capital expenditures (19,225) (24,225)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from organizers 0 40,500
Borrowing under line of credit 93,000 130,500
Proceeds from issuance of common stock 0 10
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NET CASH PROVIDED BY FINANCING ACTIVITIES 93,000 171,010
--------- -----------
Net increase in cash 3,277 3,473
Cash, beginning of period 196 0
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Cash, end of period $ 3,473 $ 3,473
========= ===========
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid $ 524 $ 524
Taxes paid $ 0 $ 0
</TABLE>
See notes to financial statements.
5
<PAGE> 6
GATEWAY BANCSHARES, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements,
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto included the Company's special financial report filed
under cover Form 10-KSB for the year ended December 31, 1995.
NOTE B - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Gateway Bancshares, Inc., (the "Company") was formed to become a bank holding
company to acquire all the stock of a planned new bank in Ringgold, Georgia, to
be called Gateway Bank & Trust, (the "Bank").
Prior to the Company's incorporation on October 3, 1995, organizational and
pre-opening activities were conducted by the organizers through a general
partnership. Commitments described in Notes 2 through 4 entered into by the
partnership were subsequently assumed or will be assumed by the Company.
Activities since inception (July 11, 1995) have consisted of organizational and
pre-opening activities necessary to obtain regulatory approvals and to
otherwise prepare to commence business as a financial institution.
In October 1995, the Company issued 1 share of common stock to an organizing
director for $10 in connection with the organization of the Company.
6
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (continued)
Premises and Equipment
Premises and equipment are stated at cost. No depreciation has been taken
during the development and construction stage of the Company.
Pre- opening, organization and stock offering costs
Organization costs are primarily consulting, legal and regulatory fees related
to the incorporation and initial organization of the Company and the Bank.
Pre-opening costs are initial expenses incurred to prepare the Bank to commence
business as a financial institution. Organization costs have been capitalized
and will be amortized on a straight-line basis over five years once the Bank
commences operation. Stock offering costs have been deferred and will be
charged to additional paid-in capital when the stock offering is completed.
Additional stock offering, organizational and pre-opening costs are expected to
be incurred.
Income taxes
The Company and the Bank are subject to federal and state income taxes. No
taxes have been accrued or paid because of operating losses incurred during the
pre-opening stage.
Net loss per common share
Net loss per common share is based on the number of shares outstanding for the
periods presented.
NOTE 2- PROPOSED STOCK OFFERING:
The Company intends to sell to its organizers and the public, by subscription,
a minimum of 625,000 shares of its $5 par value common stock up to a maximum
of 700,000 shares for a purchase price of $10 per share. The organizers intend
to purchase 14.8% of the shares under the minimum offering and 13.2% of the
shares if the maximum offering is sold. The existing organizers and directors
may, but are not obligated to purchase additional shares if such purchases are
necessary to complete the minimum offering. The maximum aggregate number of
shares that these organizers and directors may purchase is 312,500 shares or
50% of the minimum offering and 44.6% of the maximum offering.
The net proceeds of the stock offering will be used to repay the line of credit
borrowings (Note 3), fund pre-opening expenses and capitalize the Bank. The
Bank will use proceeds to construct a building, reimburse the Company for pre-
opening expenses and provide working capital for the commencement of business.
7
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (concluded)
NOTE 3- NOTE PAYABLE:
Organization and pre-opening expenses have been partially funded with
borrowings under a $40,500 loan from the organizers at no interest. The
Company also has established a line of credit with an independent bank for
$250,000 at the prime rate. It is the intent of the Company's organizers to
extend this line of credit if necessary until the time the Company's stock is
sold.
NOTE 4- COMMITMENTS AND RELATED PARTY TRANSACTIONS:
Organization and pre-opening expenses have been funded with a loan from the
organizers to the Company, as described in Note 3.
On August 9, 1995, the organizers entered into an Option Agreement For Lease of
Real Estate (the "Lease Agreement") to lease vacant property located at 5102
Alabama Highway for 20 years with two options to renew the lease for 10 years
for each option. Pursuant to the Lease Agreement, the initial annual rental
for the property shall not exceed 10% of the fair market value of the property
as determined by qualified appraisers selected by the Company. The annual
rental will be increased each year by the increase in the Consumer Price Index
as set forth in The Wall Street Journal or other nationally recognized
publication. The initial annual rental will not exceed $25,000.
The organizers of the Bank obtained two appraisals of the property, the size of
which is approximately 210 feet by 310 feet. The first, dated July 20, 1995,
appraised the property at $3.75 per square foot. The second appraisal, dated
August 8, 1995, appraised the property at $3.44 per square foot. Copies of the
appraisals of the property were filed with the Bank's application to the
Department of Banking and the FDIC. A proposed director of the Company is a
co-owner of the property. In the opinion of the organizers, the terms of this
Lease Agreement are at least as favorable to the Company as terms available from
unrelated third parties.
The organizers plan to have a 12,000 sq. foot, two-story building constructed on
the property. There will be six teller stations and four drive-through
stations.
8
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Part I.- Financial Information
Item 2. Management's Discussion and Analysis on Plan of Operation
At March 31, 1996, the Company was a development stage enterprise and had no
earnings from operations. The Company will be a one-bank holding company and
will provide a full range of banking services to individual and corporate
customers in the Catoosa County, Georgia and surrounding areas through its
proposed wholly-owned bank subsidiary, the Bank. The Bank is to operate under
a state charter granted by the Georgia Department of Banking and Finance and
will serve its customers from its main banking facility under construction in
Ringgold, Georgia. The Company and the Bank were formed in 1995 and the
Company is a developmental stage enterprise. The Bank plans to begin business
operations in 1996. Further discussion of the Company's financial condition
and results of operations is included in the Notes to the Company's
consolidated financial statements presented in another section of this
Quarterly Report on Form 10-QSB.
The Company has secured an operating line of credit from an independent bank
for $250,000 to fund pre-opening, organizational costs and stock issue costs
until such time as the Company's stock is sold. The Company's organizers
intend to extend this line of credit, if necessary, until proceeds from the
stock sale are available. The Company expects to issue between 625,000 and
700,000 shares of its common stock at $10, within the next 12 months, for total
gross proceeds of $6,250,000 to $7,000,000.
The Company, through its proposed bank subsidiary, expects to acquire premises,
leasehold improvements, fixtures and equipment in the amount of approximately
$1,750,000 within the next 12 months.
The Company, through its proposed bank subsidiary, intends to have an
additional 14 employees, (in addition to the present 3), for operation of the
Bank. These employees are expected to be added within the next 12 months.
9
<PAGE> 10
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
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Exhibit number Description of Exhibit Page number
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11 Computation of Earnings per Share 11
27 Financial Data Schedule
(For the SEC use only)
</TABLE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended March
31, 1996.
10
<PAGE> 11
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.
GATEWAY BANCSHARES, INC.
Date August 12, 1996 /s/ Robert G. Peck
--------------- -------------------------------------------
Robert G. Peck,
President and Chief Executive Officer
Date August 12, 1996 /s/ Harle B. Green
--------------- -------------------------------------------
Harle B. Green,
Chairman and Chief Financial Officer
11
<PAGE> 1
Exhibit 11 - Computation of Earnings per Share
The following tabulation presents the calculation of primary and fully diluted
earnings per share for the three-month period ended March 31, 1996 and the
period July 11, 1995 (inception) to March 31, 1996.
<TABLE>
<CAPTION>
For the Period
Three months July 11, 1995
ended (inception) to
March 31, 1996 March 31, 1996
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<S> <C> <C>
Reported net loss $(52,378) $(54,135)
======== ========
Loss on common shares $(52,378) $(54,135)
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Weighted average common shares outstanding 1 1
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Loss per common share - primary and fully diluted
Loss from continuing operations $(52,378) $(54,135)
======== ========
Net Income $(52,378) $(54,135)
======== ========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,473
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 117,977
<DEPOSITS> 0
<SHORT-TERM> 171,000
<LIABILITIES-OTHER> 1,102
<LONG-TERM> 0
0
0
<COMMON> 10
<OTHER-SE> (54,135)
<TOTAL-LIABILITIES-AND-EQUITY> (54,125)
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 1,371
<INTEREST-INCOME-NET> (1,371)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 51,007
<INCOME-PRETAX> (52,378)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,378)
<EPS-PRIMARY> (52,378)
<EPS-DILUTED> (52,378)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
