<PAGE> 1
SPECIAL FINANCIAL REPORT
ON
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X]* ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
* THIS SPECIAL REPORT CONTAINS ONLY FINANCIAL STATEMENTS FOR THE PERIOD JANUARY
2, 1997 TO SEPTEMBER 30, 1997, IN ACCORDANCE WITH THE PROVISIONS OF RULE 15d-2.
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 No. 0-23381
BINGHAM FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF MICHIGAN 38-3313951
State of Incorporation I.R.S. Employer I.D. No.
31700 MIDDLEBELT ROAD
SUITE 125
FARMINGTON HILLS, MICHIGAN 48334
(248) 932-9656
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
Indicate by check mark whether the Registrant (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
---
(Registrant has not been subject to filing requirements for the past 90 days.)
As of February 2, 1998, the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately $10,856,250
determined in accordance with the price at which the stock was sold.
As of February 2, 1998, there were 1,295,000 shares of the Registrant's
common stock issued and outstanding.
<PAGE> 2
Item 8. Financial Statements and Supplementary Data
BINGHAM FINANCIAL SERVICES CORPORATION
CONTENTS
PAGES
Report of Independent Accountants.............................................1
Financial Statements:
Balance Sheet.............................................................2
Statement of Operations...................................................3
Statement of Changes in Stockholder's Equity (Deficiency).................4
Statement of Cash Flows...................................................5
Notes to Financial Statements..........................................6-10
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Bingham Financial Services Corporation:
We have audited the accompanying balance sheet of Bingham Financial Services
Corporation as of September 30, 1997 and the related statements of operations,
changes in stockholder's equity (deficiency), and cash flows for the period
January 2, 1997 (date of inception) to September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bingham Financial Services
Corporation as of September 30, 1997 and the results of its operations and cash
flows for the period January 2, 1997 (date of inception) to September 30, 1997
in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
November 12, 1997, except for Note 8,
as to which the date is December 16, 1997
1
<PAGE> 4
BINGHAM FINANCIAL SERVICES CORPORATION
BALANCE SHEET
as of September 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Installment contracts receivable, net $ 9,541,100
Organization costs, net 102,100
Other assets 9,000
------------
Total assets $ 9,652,200
============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Liabilities:
Accounts payable, trade $ 14,800
Note payable, Sun 9,747,500
------------
Total liabilities 9,762,300
------------
Stockholder's equity (deficiency):
Preferred stock, no par value, 10,000,000 shares authorized, no shares issued and
outstanding -
Common stock, no par value, 10,000,000 shares authorized, 100 shares issued and
outstanding 100
Deficit (110,200)
------------
Total stockholder's equity (deficiency) (110,100)
------------
Total liabilities and stockholder's equity (deficiency) $ 9,652,200
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF OPERATIONS
for the period January 2, 1997 (date of inception) to September 30, 1997
<TABLE>
<S> <C>
Revenues, interest income $ 280,200
-------------
Costs and expenses:
Interest expense 194,800
Provision for credit loss 58,100
General and administrative 115,800
Other operating expenses 21,700
-------------
Total costs and expenses 390,400
Loss before income taxes (110,200)
Provision for income taxes -
-------------
Net loss $ (110,200)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY)
for the period January 2, 1997 (date of inception) to September 30, 1997
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDER'S
RETAINED EQUITY
COMMON EARNINGS (DEFICIENCY)
STOCK (DEFICIT)
------------ ------------- ------------------
<S> <C> <C> <C>
Balance, January 2, 1997 - - -
Issuance of 100 shares of common stock $ 100 $ 100
Net loss $ (110,200) (110,200)
------------ ------------- ------------------
Balance, September 30, 1997 $ 100 $ (110,200) $ (110,100)
============ ============= ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
for the period January 2, 1997 (date of inception) to September 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (110,200)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for credit losses 58,100
Amortization 18,000
Increase in other assets (9,000)
Increase in accounts payable and accrued liabilities 209,600
Organization costs (120,100)
------------
Net cash provided by operating activities 46,400
------------
Cash flows from investing activities:
Installment contracts receivable originated (9,843,600)
Collections on installment contracts receivable 244,400
------------
Net cash used in investing activities (9,599,200)
------------
Cash flows from financing activities:
Proceeds from note payable, Sun 9,552,700
Issuance of common stock 100
------------
Net cash flows provided by financing activities 9,552,800
------------
Net change in cash and cash equivalents -
Cash and cash equivalents, beginning of period -
------------
Cash and cash equivalents, end of period -
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 8
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. NATURE OF OPERATIONS: Bingham Financial Services Corporation (the
"Company") was incorporated as a wholly owned subsidiary of Sun Home
Services, Inc. and an affiliate of Sun Communities, Inc. ("Sun"). The
Company provides financing to residents living in manufactured housing
communities for the purchase of new and used manufactured homes. The
Company began operations January 2, 1997 with its fiscal year ending
September 30, 1997. As of September 30, 1997, approximately 49
percent, 24 percent, 15 percent, 9 percent and 3 percent of the
borrowers are located in Michigan, Indiana, Texas, Florida and Kansas,
respectively.
b. USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
c. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments with an initial maturity of three months or less to be
cash and cash equivalents.
d. INSTALLMENT CONTRACTS RECEIVABLE: Installment contracts receivable are
reported at their outstanding unpaid principal balances reduced by an
allowance for credit losses and net of any deferred fees or costs on
original loans. Installment contracts receivable are collateralized by
the manufactured homes.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the
related loan.
Allowance for credit losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on industry data,
known and inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay, the estimated value of any
underlying collateral and current economic conditions.
e. INCOME RECOGNITION: Interest income from installment contracts
receivable is recognized using the interest (actuarial) method.
Accrual of interest income on installment contracts receivable is
suspended when a loan is contractually delinquent for 90 days or more.
The accrual is resumed when the loan becomes contractually current,
and past-due interest income is recognized at that time.
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED:
f. FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and
assumptions were used by the Company in estimating fair values of
financial instruments as disclosed herein:
- CASH AND CASH EQUIVALENTS: The carrying amount of cash
approximates fair value.
- INSTALLMENT CONTRACTS RECEIVABLE: Fair values for installment
contracts receivable are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. Due to
the recent issuance of these loans, the carrying amount
approximates fair value.
- ACCOUNTS PAYABLE AND NOTE PAYABLE, AFFILIATE: The
carrying amount approximates fair value because of the short
maturity of these obligations.
- ACCRUED INTEREST: The carrying amount of accrued interest
approximates their fair values.
g. INCOME TAXES: Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which
the deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes. The Company will file a consolidated tax return with the parent
company, Sun Home Services, Inc. until consummation of the initial
public offering discussed in Note 8 below. As Sun Home Services, Inc.
has had losses, no tax benefit is expected to be gained from the
deferred tax asset generated by the Company in the current year.
h. ORGANIZATION COSTS: Costs associated with the formation of the Company
have been classified as organization costs. Organization costs are
amortized on a straight-line basis over a five year life.
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. TRANSACTIONS WITH AFFILIATES:
During 1997, the Company had, and expects to have in the future,
transactions with affiliate companies in the ordinary course of business
and on substantially the same terms, including interest rates, as with
nonaffiliates. Sun provided financial support in the form of a note of
$9,552,700, bearing interest at 7 percent per annum. Accrued interest at
September 30, 1997 of $194,800 is unpaid and due on demand. In addition,
certain affiliates provide administrative and management support. For
Sun's services under the Administration Agreement, the Company is billed
on a direct cost basis, not to exceed $75,000 for the first year. As
compensation under the Participants Support Agreement between Sun and the
Company, Sun will receive an annual fee of .43 percent of the average
loan balance under Contracts originated by Sun. Payments to Sun for such
services and fees are charged to operating expenses and were $56,300 and
$14,500, respectively. In addition, Sun has been granted 330,000
Participants Options as discussed in Note 6 below.
3. INSTALLMENT CONTRACTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES:
The contractual maturities of installment contracts receivable, net of
unearned income at September 30, 1997 were as follows: 1998 - $100,900;
1999 - $112,400; 2000 - $125,200; 2001 - $139,500; 2002 - $155,300, and
$8,965,900 thereafter. The foregoing should not be regarded as a forecast
of future cash collections, as actual experience may be that a
substantial portion of these loans may be renewed or repaid before
contractual maturity date.
An analysis of the allowance for credit losses on installment contracts
receivable for the nine months ended September 30, 1997 follows:
Balance, beginning of period -
Additions $ 58,100
----------
Balance, end of period $ 58,100
==========
All of the Company's installment contracts receivable have fixed rates of
interest adjusted as necessary for credit risk. At September 30, 1997,
there were no nonaccrual loans.
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. COMMITMENTS AND CONTINGENCIES:
The Company is subject to various claims and legal proceedings arising
out of the normal course of business, none of which, in the opinion of
management, are expected to have a material effect on the Company's
financial position.
At September 30, 1997, the Company has commitments to originate
installment contracts receivable approximating $3 million.
5. LOAN WITH AFFILIATE:
In connection with the initial public offering discussed in Note 8 below,
the Company entered into a subordinated loan agreement with Sun. The
subordinated loan agreement provides for a subordinated debt facility of
up to $10,000,000, which indebtedness shall be subordinate to all senior
debt of the Company. In accordance with the subordinated loan agreement,
the Company will issue detachable warrants to Sun covering 400,000 shares
of common stock at a price of $10.00 per warrant share upon consummation
of the initial public offering. The detachable warrants have a term of
seven years and may be exercised at any time after the fourth anniversary
of this issuance. The warrants will be recorded at fair value at the time
of issuance.
6. PARTICIPANT SUPPORT AGREEMENT:
In connection with the initial public offering discussed in Note 8 below,
as of September 30, 1997, the Company entered into the participants
support agreement with Sun. Pursuant to the participants support
agreement, participants options were granted to Sun on September 30, 1997
and will vest if, and only if, Sun is a party to and in compliance with
the terms of the participants support agreement on the vesting date and
on December 31st of the previous year. The participants options will vest
in eight equal annual amounts, each consisting of 41,250 participants
options, on January 31, 2001 through 2008. The participants options may
be exercised at any time after vesting until expiration ten years after
the date of vesting. Each participants option vesting on January 31, 2001
to 2003 will entitle the holder to purchase one share of common stock for
a purchase price of $10. Each participants option vesting on January 31,
2004, 2005 and 2006 will entitle the holder to purchase one share of
common stock for $12 per share. Each participants option vesting on
January 31, 2007 and 2008 will entitle the holder to purchase one share
of common stock for $14.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. PARTICIPANT SUPPORT AGREEMENT, CONTINUED:
The Company will recognize service costs based on the fair value method
as prescribed by Statements of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting for Stock-Based Compensation". Service
costs will be amortized based on the vesting period of the options.
On a pro forma basis (unaudited), assuming the participants support
agreement was in effect on January 2, 1997 and that the participants
options were granted to Sun on that date, recognition of service costs
associated with the participants options would increase the unaudited pro
forma net loss for the nine month period ended September 30, 1997 by
approximately $122,700 to equal $232,900 and would increase the
stockholders' deficiency at September 30, 1997 to $232,800.
7. STOCK OPTION PLANS:
In addition to common shares reserved under the loan agreement with the
affiliate and the Participant's Support Agreement, the Company has set
aside 10 percent of the total number of shares of common stock issued and
outstanding from time to time (i.e., upon consummation of the initial
public offering discussed in Note 8, excluding the underwriters
overallotment option, there will be 120,000 shares available for
issuance) upon exercise of Stock Options granted to officers, directors,
key employees and consultants pursuant to the Company's 1997 Stock Option
Plan.
At September 30, 1997, no options had been granted under the Company's
1997 Stock Option Plan.
Once options are granted under the 1997 Stock Option Plan, the Company
has adopted the disclosure requirements of SFAS No. 123. In accordance
with the provisions of SFAS No. 123, the Company will apply APB Opinion
25 and related interpretations in accounting for its 1997 Stock Option
Plan and accordingly, will not recognize compensation costs for those
options once granted.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. SUBSEQUENT EVENTS:
In connection with the initial public offering, on October 27, 1997 the
Company sold 25,000 shares to Sun for gross proceeds of $250,000.
The Company consummated an initial public offering of 1,200,000 shares of
common stock on November 19, 1997. The initial offering price was $10.00,
which provided approximate proceeds to the Company of $11,160,000. On
December 16, 1997, an additional 70,000 shares were issued, which
provided approximate proceeds of $651,000.
Upon consummation of these transactions, stockholders' equity would be as
follows:
<TABLE>
<S> <C>
Preferred stock, no par value: 10,000,000 shares authorized; no shares issued and
outstanding -
Common stock, no par value: 10,000,000 shares authorized; 1,295,000 shares
issued and outstanding $ 11,791,000
Retained earnings (deficit) (110,200)
-------------
Total stockholders' equity $ 11,680,800
=============
</TABLE>
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 2, 1998
Bingham Financial Services Corporation
By: /s/ Jeffrey P. Jorissen
------------------------------------
Jeffrey P. Jorissen, President, Chief
Executive Officer and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K (containing only financial statements for
the period in question in accordance with Rule 15d-2) has been signed by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
NAME TITLE DATE
- ---- ----- ----
/s/ Gary A. Shiffman Chairman of the February 2, 1998
- ----------------------- Board of Directors,
Gary A. Shiffman Secretary
/s/ Jeffrey P. Jorissen President, Chief February 2, 1998
- ----------------------- Executive Officer,
Jeffrey P. Jorissen Chief Financial
Officer and
Director
/s/ Milton M. Shiffman Director February 2, 1998
- -----------------------
Milton M. Shiffman
Director February __, 1998
- -----------------------
Robert H. Orley
Director February __, 1998
- -----------------------
Brian M. Hermelin
<PAGE> 15
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,652,200
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> (110,200)
<TOTAL-LIABILITY-AND-EQUITY> 9,652,200
<SALES> 0
<TOTAL-REVENUES> 280,200
<CGS> 0
<TOTAL-COSTS> 78,800
<OTHER-EXPENSES> 115,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 194,800
<INCOME-PRETAX> (110,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (110,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,200)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
