<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1998
------------------
Transition report under Section 13 or 15(d) of the Exchange Act
- --- For the transition period from to
--------------- ----------------
Commission File No. 333-45979
UNITY HOLDINGS, INC.
--------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Georgia 58-2350609
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(State of Incorporation) (I.R.S. Employer Identification No.)
19 South Public Square, Suite 103, Cartersville, GA 30120
---------------------------------------------------------
(Address of Principal Executive Offices)
(770) 606-0555
--------------
(Issuer's Telephone Number, Including Area Code)
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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
838,710 shares of common stock, par value $.01 per share, were issued
and outstanding as of November 15, 1998.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
UNAUDITED
---------
<S> <C>
Cash and cash equivalents $ 0
Interest-bearing deposits in banks $ 7,357,791
Deferred stock issue and organization costs 399,416
Premises and equipment 872,127
Option to purchase land 148,469
Prepaid expenses 48,792
-----------
Total assets $ 8,826,595
===========
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
LIABILITIES
Stock subscription deposits $ 7,879,280
Note payable $ 1,152,079
Accrued expenses 29,156
Total liabilities $ 9,060,515
-----------
STOCKHOLDER'S (DEFICIT)
Preferred stock, $.01 par value; 10,000,000 shares
authorized; none issued
Common stock, $.01 par value, 10,000,000 shares
authorized, 10 shares issued and outstanding $ 0
Additional paid-in-capital 100
Deficit accumulated during the development stage (234,020)
Total stockholder's (deficit) (233,920)
Total liabilities and stockholder's (deficit) $ 8,826,595
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
FOR THE THREE FOR THE NINE INCEPTION (OCTOBER
MONTHS ENDED MONTHS ENDED 8, 1997) THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998
-------------- ------------- ------------------
<S> <C> <C> <C>
REVENUES
Interest income $ 74,535 $ 76,952 $ 76,952
Total revenues 74,535 76,592 76,952
========= ========= =========
EXPENSES
Interest expense 22,016 36,218 39,329
Salary and employee benefits 73,602 165,047 193,604
Occupancy and equipment expenses 1,582 4,791 5,325
Other operating expenses 29,664 66,149 72,714
--------- --------- ---------
Total expenses 126,864 272,205 310,972
--------- --------- ---------
Net loss $ (52,329) $(195,253) $(234,020)
========= ========= =========
BASIC AND DILUTED LOSS PER
COMMON SHARE $ 5,233 $ 19,525 $ 23,402
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
NINE MONTHS (OCTOBER 8,
ENDED 1997) THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (195,253) $ (234,020)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in accrued expenses 24,828 29,156
Increase in prepaid expenses (48,792) (48,792)
----------- -----------
Net cash used in operating activities (219,217) (253,656)
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (7,357,791) (7,357,791)
Purchase of property and equipment (868,342) (872,127)
Increase in deferred stock issue and organization costs (110,430) (184,920)
Increase in options to purchase land (70,030) (148,469)
----------- -----------
Net cash used for investing activities (8,406,593) (8,563,307)
----------- -----------
FINANCING ACTIVITIES
Proceeds from stock subscription deposits, net 7,072,668 7,072,668
Proceeds from sale of common stock -- 100
Proceeds from notes payable 1,552,956 1,744,195
----------- -----------
Net cash provided by financing activities 8,625,624 8,816,963
----------- -----------
Net decrease in cash (186) --
CASH, BEGINNING OF PERIOD 186 --
----------- -----------
CASH, END OF PERIOD $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
BUSINESS ACTIVITY AND ORGANIZATION
Unity Holdings, Inc. (the "Company") was incorporated to operate as a
bank holding company pursuant to the Federal Bank Holding Company Act of 1956
and the Georgia Bank Holding Company Act, and to purchase 100% of the issued and
outstanding stock of Unity National Bank (the "Bank"), an association to be
organized under the laws of the United States, which will conduct a general
banking business in Cartersville, Georgia. The Bank's organizers filed a joint
application with the Office of the Comptroller of the Currency (the "OCC") and
the Federal Deposit Insurance Corporation (the "FDIC") to charter the proposed
Bank and for FDIC insurance of the Bank's deposits. The Company has received
preliminary approval from the OCC and FDIC. The Company also filed an
application to become a bank holding company with the Federal Reserve Board (the
"FRB") and the Georgia Department of Banking and Finance (the "DBF") and
received preliminary approvals of these applications on April 29, 1998. Upon
obtaining all regulatory approval, the Company will be a registered bank holding
company subject to regulation by the FRB and the DBF.
Activities since the inception have consisted of the Company's and
Bank's organizers engaging in organizational and preopening activities necessary
to obtain regulatory approvals and to prepare to commence business as a
financial institution.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
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 nine-month
period ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Registration Statement on Form SB-2 (Registration Number
333-45979) as filed with and declared effective by the Securities and Exchange
Commission.
NOTE 2. COMMON STOCK OFFERING
The Company filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission offering for sale a minimum of 740,000 and a
maximum of 1,000,000 shares of the Company's common stock at $10 per share. As
of September 30, 1998 the Company had raised $7,879,290 through subscriptions
for 787,928 shares of stock. The Company closed the offering on October 23,
1998, after selling a total of 838,710 shares with gross proceeds of $8,387,100.
5
<PAGE> 6
NOTE 3. CURRENT ACCOUNTING DEVELOPMENTS
The adoption of the provisions of SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
that became effective on January 1, 1998 did not have a material effect on the
Company's financial statements.
The adoption of SFAS No. 128, "Earnings Per Share," that became
effective as of December 31, 1997 had no effect on the calculation of earnings
per common share.
The adoption of SFAS No. 130, "Reporting Comprehensive Income," that
became effective on April 1, 1998 required the Company to report comprehensive
income in the Company's Statements of Income and Comprehensive Income. As of
September 30, 1998, the Company has no items of other comprehensive income.
In April 1998 the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires that costs of start-up activities and
organization costs be expensed as incurred. SOP 98-5 becomes effective for
financial statements for fiscal years beginning after December 15, 1998.
However, early adoption is encouraged for fiscal years in which financial
statements have not been issued. As of September 30, 1998, the Company had
$399,146 of unamortized deferred stock issue and organization costs which will
be required to be written off upon adoption of SOP 98-5. A portion of the
$399,146 amount represents deferred stock issue costs which will be charged to
capital surplus upon issue of common stock.
In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Earlier adoption is encouraged, but
permitted only as of the beginning of any fiscal quarter that begins after June
1998. The Company has not determined the effect of SFAS 133 on its financial
condition and results of operations at this time.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial statements.
6
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion contains "forward-looking statements" relating
to, without limitation, future economic performance, plans and objectives of
management for future operations, and projections of revenues and other
financial items that are based on the beliefs of the Company's management, as
well as assumptions made by and information currently available to the Company's
management. The words "expect," "estimate," "anticipate," and "believe," as well
as similar expressions, are intended to identify forward-looking statements. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements, and the Company's operating performance each quarter
is subject to various risks and uncertainties that are discussed in detail in
the Company's filings with the Securities and Exchange Commission, including the
"Risk Factors" section in the Company's Registration Statement on Form SB-2
(Registration Number 333-45979) as filed with and declared effective by the
Securities and Exchange Commission.
The Company was organized on October 8, 1997. Since October 8, 1997,
the Company's principal activities have related to its organization, the
conducting of its initial public offering, the pursuit of approvals from the OCC
for its application to charter the Bank, and the pursuit of approvals from the
FDIC for its application for insurance of the deposits of the Bank. On February
11, 1998, the Company received preliminary approval from the OCC to charter the
Bank. On March 2, 1998, the FDIC granted preliminary approval of deposit
insurance application for the Bank. On April 29, 1998 the Company received
preliminary approval from the Federal Reserve to become a bank holding company.
At September 30, 1998, the Company had total assets of $8,826,595,
consisting principally of interest bearing deposits in other banks of
$7,357,791, and deferred stock issue and organization costs of $399,416, as the
Company held $7,879,280 in escrow in connection with its initial public
offering.
The Company's liabilities at September 30, 1998, were $9,060,515,
consisting primarily of stock subscription deposits of $7,879,280, a note
payable to First Tennessee Bank of $1,152,079, and accrued expenses of $29,156.
The Company had a shareholder's deficit of $(233,920) at September 30, 1998.
The Company had a net loss of $(195,253) for the nine months ended
September 30, 1998. These losses resulted from expenses incurred in connection
with activities related to the organization of the Company and the Bank. These
activities included (without limitation) the preparation and filing of an
application with the OCC to charter the Bank, the preparation and filing of an
application with the FDIC to obtain insurance of the deposits of the Bank,
responding to questions and providing additional information to the OCC and the
FDIC in connection with the application process, the selling of the Company's
common stock in the offering, meetings and discussions among various Organizers
regarding application information, target markets, and capitalization issues,
and planning and organizing for the opening of the Bank. Because the Company is
in the organizational stage, it has had no operations from which to generate
revenues.
Since the inception of the Company, all activities have consisted of
organizing the Company and Bank, obtaining all required regulatory approvals,
and selling stock subscriptions. All operations have been funded by proceeds
from a $700,000 line of credit, as well as an additional $500,000 line of
7
<PAGE> 8
credit used to purchase the property, each guaranteed by the organizers. Upon
completion of the stock offering, the lines of credit will be repaid with
proceeds from the issuance of stock.
The Company intends to devote the remainder of this fiscal year to
completing the organization of the Bank and organizing and developing the other
business activities of the Company. These organizational activities will
include, with respect to the Bank, completing all required steps for final
approval from the OCC for the Bank to open for business, hiring qualified
personnel to work in the various offices of the Bank, conducting public
relations activities on behalf of the Bank, developing prospective business
contacts for the Bank and the Company, and taking other actions necessary for a
successful bank opening. The Company anticipates that the Bank will open for
business in late November or early December 1998.
The Company, through the Bank, will offer a full range of commercial
banking services to individual, professional and business customers in its
primary service area. These services will include personal and business loans,
checking accounts, savings, and time certificates of deposit. The loans,
transaction accounts, and time certificates will be at rates competitive with
those offered in the Bank's primary service area. Customer deposits with the
Bank will be insured to the maximum extent provided by law through the FDIC. The
Bank intends to offer night depository and bank-by-mail services and to sell
travelers checks (issued by an independent entity) and cashiers checks. The Bank
does not anticipate offering trust and fiduciary services initially and will
rely on trust and fiduciary services offered by correspondent banks until the
Bank determines that it is profitable to offer such services directly.
Initially, the Bank anticipates deriving its income principally from
interest charged on loans and, to a lesser extent, from interest earned on
investments, from fees received in connection with the origination of loans, and
from other services. The Bank's principal expenses are anticipated to be
interest expense on deposits and operating expenses.
Management believes the Company and the Bank can satisfy future cash
requirements indefinitely, and will not have to raise additional capital during
the first twelve months of operations. The Bank intends to accept deposits and
make loans and investments in accordance with an asset and liability management
framework that emphasizes appropriate levels of liquidity and interest rate
risk.
Currently, the Company has 8 employees and expects this number to
increase to approximately 20 by the end of its first fiscal year.
CAPABILITY OF DATA PROCESSING SOFTWARE TO ACCOMMODATE THE YEAR 2000
Like many financial institutions, the Company will rely upon computers
for the daily conduct of its business and for data processing generally. There
is concern among industry experts that commencing on January 1, 2000, computers
will be unable to "read" the new year and that there may be widespread computer
malfunctions. Management has considered these concerns in selecting its core
data processing service provider and other providers. Management believes that
the Company will be able to meet all regulatory timetable guidelines relating to
the year 2000 issue, although there can be no assurances in this regard.
On August 7, 1998, the President signed into law H.B. 1151, the "Credit
Union Membership Access Act," which substantially expands the permissible scope
of groups and individuals who may be members of a single credit union. Because
credit unions are exempt from corporate income taxes, they
8
<PAGE> 9
have a competitive advantage over commercial banks, even though they are subject
to extensive additional regulations. As a result of the enactment of H.R. 1151,
there is a risk that commercial banks, particularly community-oriented smaller
banks such as the Bank, will lose substantial deposits, lending opportunities,
and other business to newly-expanded credit unions. As a result of these
competitive factors, the Bank may have to pay higher rates of interest to
attract deposits. From time to time, various bills are introduced in the United
States Congress with respect to the regulation of financial institutions.
Certain of these proposals, if adopted, could significantly change the
regulation of banks and the financial services industry. The Company cannot
predict whether any of these proposals will be adopted or, if adopted, how these
proposals would affect the Company.
The Company is not aware of any known trends, events or uncertainties,
other than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any other current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to security holders for a vote during
the three months ended September 30, 1998.
ITEM 5. OTHER INFORMATION.
The Company filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission offering for sale a minimum of 740,000 and a
maximum of 1,000,000 shares of the Company's common stock at $10 per share. As
of September 30, 1998 the Company had raised $7,879,280 through subscriptions
for 787,928 shares of stock. The Company closed the offering on October 23,
1998, after selling a total of 838,710 shares with gross proceeds of $8,387,100.
9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C> <C>
(a) Exhibits.
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 See exhibits 3.1 and 3.2 for provisions of Company's Articles
of Incorporation and Bylaws Defining the Rights of
Shareholders*
4.2 Form of Stock Certificate*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 Employment Agreement dated as of December 12, 1997 between the
Company and Michael L. McPherson*
10.2 Option to Purchase Property*
10.3 Escrow Agreement between the Company and First Tennessee Bank*
10.4 Line of Credit Note*
10.5 Subscription Agreement*
10.6 Agency Agreement dated February 6, 1998 between the Company
and Attkisson, Carter & Akers*
23.1 Consent of Accountants*
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(filed as part of Exhibit 5.1)*
24.1 Power of Attorney (part of signature page to Registration
Statement)*
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
- ----------------
*Incorporated by reference to the Company's Registration Statement on Form SB-2,
File No. 333-45979.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during the
quarter ended September 30, 1998.
10
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITY HOLDINGS, INC.
Date: November 13, 1998 By: /s/ Michael L. McPherson
-------------------- ---------------------------------------
Michael L. McPherson
President and Chief Executive Officer
11
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 See exhibits 3.1 and 3.2 for provisions of Company's Articles
of Incorporation and Bylaws Defining the Rights of
Shareholders*
4.2 Form of Stock Certificate*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 Employment Agreement dated as of December 12, 1997 between the
Company and Michael L. McPherson*
10.2 Option to Purchase Property*
10.3 Escrow Agreement between the Company and First Tennessee Bank*
10.4 Line of Credit Note*
10.5 Subscription Agreement*
10.6 Agency Agreement dated February 6, 1998 between the Company
and Attkisson, Carter & Akers*
23.1 Consent of Accountants*
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(filed as part of Exhibit 5.1)*
24.1 Power of Attorney (part of signature page to Registration
Statement)*
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
- ----------------
*Incorporated by reference to the Company's Registration Statement on Form SB-2,
File No. 333-45979.
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITY
HOLDINGS, INC. UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<INT-BEARING-DEPOSITS> 7,357,791
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 8,826,595
<DEPOSITS> 7,879,280
<SHORT-TERM> 1,152,079
<LIABILITIES-OTHER> 29,156
<LONG-TERM> 0
0
0
<COMMON> 10
<OTHER-SE> (233,920)
<TOTAL-LIABILITIES-AND-EQUITY> 8,826,595
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 74,535
<INTEREST-TOTAL> 74,535
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 272,205
<INTEREST-INCOME-NET> (0)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 66,149
<INCOME-PRETAX> (195,253)
<INCOME-PRE-EXTRAORDINARY> (195,253)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195,253)
<EPS-PRIMARY> (19,525)
<EPS-DILUTED> (19,525)
<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>
