SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File No. 333-71773
HORIZON BANCORPORATION, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 65-0840565
------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3005-26th Street West, Bradenton, Florida 34205
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(Address of Principal Executive Offices)
(941) 753-2265
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(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 Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common stock, par value $.01 per share, 21,600 shares issued
and outstanding as of June 30, 1999.
Transitional Small Business Disclosure Format (Check one):
Yes X No
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements.
- ------------------------------
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Balance Sheets (Unaudited)
ASSETS
- ------
June 30, December 31,
1999 1998
---- ----
Cash $ 41,929 $ 28,799
Subscriptions receivable 21,000 21,000
Deferred registration costs (Note 2) 105,866 60,878
Property and equipment, net 87,443 4,293
Other assets 11,179 12,102
--------- --------
Total Assets $ 267,417 $ 127,072
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Interest payable $ 2,127 $ 601
--------- --------
Notes payable (Note 5) 366,350 109,000
Total Liabilities $ 368,477 $ 109,601
--------- --------
Commitments and contingencies (Note 4)
Stockholders' Equity (Note 1):
Common stock, $.01 par value,
25,000,000 shares authorized,
21,600 shares issued and outstanding $ 216 $ 216
Common stock subscribed 42 42
Paid-in-capital 128,742 128,742
(Deficit) accumulated during
the development stage (230,060) (111,529)
--------- --------
Total Stockholders' Equity (101,060) 17,471
--------- --------
Total Liabilities and
Stockholders' Equity $ 267,417 $ 127,072
========= ========
Refer to notes to the financial statements.
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Statements of Income (Unaudited)
For the three months
ended June 30,
--------------------
1999 1998
---- ----
Revenues:
Interest income $ 22,064 $ 169
-------- -----
Total revenues 22,064 169
-------- -----
Expenses:
Employee leasing $ 57,424 $ - -
Organizational expenses 149 - -
Insurance expense 2,797 - -
Interest expense 8,665 - -
Rent expense 3,579 - -
Advertising & promotional - - - -
Miscellaneous other expenses 7,462 49
-------- -----
Total expenses $ 80,076 49
-------- -----
Net (loss) $ (58,012) $ 120
======== =====
Basic (loss) per share (Note 2) $ (2.69) $ - -
======== =====
Refer to notes to the financial statements.
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Statements of Income (Unaudited)
For the six months
ended June 30,
--------------------
1999 1998
---- ----
Revenues:
Interest income $ 33,569 $ 169
-------- -----
Total revenues 33,569 169
-------- -----
Expenses:
Employee leasing $ 88,683 $ - -
Organizational expenses 25,410 - -
Insurance expense 4,975 - -
Interest expense 11,219 - -
Rent expense 5,869 - -
Advertising & promotional 812 - -
Miscellaneous other expenses 15,132 49
-------- -----
Total expenses $ 152,100 49
-------- -----
Net (loss) $(118,531) $ 120
-------- -----
Basic (loss) per share (Note 2) $ (5.49) $ - -
======== =====
Refer to notes to the financial statements.
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows (Unaudited)
For the six months
ended June 30,
--------------------
1999 1998
---- ----
Cash flows from pre-operating
activities of the development stage:
Net (loss) $(118,531) $ 120
Adjustments to reconcile net (loss) to
net cash used by pre-operating activities
of the development stage:
(Increase) in deferred registration costs (44,988) - -
Increase in accounts payable 1,526 - -
Decrease in other assets 923 (5,610)
-------- -------
Net cash used by pre-operating
activities of the development stage $(161,070) $ (5,490)
-------- -------
Cash flows from investing activities:
Purchase of fixed assets $ (83,150) $ - -
-------- -------
Net cash used in investing activities $ (83,150) $ - -
-------- -------
Cash flows from financing activities:
Increase in borrowings $ 257,350 $ 72,000
-------- -------
Net cash provided from financing activities $ 257,350 $ 72,000
-------- -------
Net increase in cash $ 13,130 $ 66,510
Cash at beginning of period 28,799 - -
-------- -------
Cash at end of period $ 41,929 $ 66,510
======== =======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 9,693 $ - -
======== =======
Income taxes $ - - $ - -
======== =======
Refer to notes to the financial statements.
HORIZON BANCORPORATION, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (Unaudited)
June 30, 1999
Note 1 - Summary of Organization
Manasota Group, Inc. ("Manasota") was incorporated on May
27, 1998, for the purpose of becoming a bank holding company with
respect to a proposed de novo bank, Horizon Bank (the "Bank") to
be located in Bradenton, Florida. Manasota was later renamed
Horizon Bancorporation, Inc., Bradenton, Florida (the "Company").
Accordingly, all financial transaction undertaken by Manasota are
reflected in the Company's financial statements as of June 30,
1999 and December 31, 1998. An application for prior approval to
charter a bank was filed with the Division of Banking, State of
Florida ("DBF"). An application for deposit insurance was filed
with the Federal Deposit Insurance Corporation ("FDIC"). Once
the application with the DBF is approved, two additional
applications, both with the Federal Reserve Board ("FRB"), will
be filed; the first for Bank membership and the second for prior
approval to become a bank holding company. When all regulatory
applications are approved and the minimum stock sale is
successfully completed, the Company will acquire 100 percent of
the voting stock of the Bank by injecting a minimum of $5.0
million into the Bank's capital accounts.
The Company is authorized to issue up to 25.0 million shares
of its $.01 par value per share common stock. Each share is
entitled to one vote and shareholders have no preemptive or
conversion rights. As of June 30, 1999 and December 31, 1998,
there were 21,600 shares of the Company's common stock issued and
outstanding and an additional 4,200 shares subscribed for.
Additionally, the Company has authorized the issuance of up to
1.0 million shares of its $.01 par value per share preferred
stock. The Company's Board of Directors may, without further
action by the shareholders, direct the issuance of preferred
stock for any proper corporate purpose with preferences, voting
powers, conversion rights, qualifications, special or relative
rights and privileges which could adversely affect the voting
power or other rights of shareholders of common stock. As of
June 30, 1999, and December 31, 1998, there were no shares of the
Company's preferred stock issued or outstanding.
The Company's Articles of Incorporation and Bylaws contain
certain provisions that might be deemed to have potential
defensive "anti takeover" effect. These certain provisions
include: (i) The Board of Directors is divided into three
classes with members of each class serving three-year terms with
the election of each class in successive years; (ii) membership
on the Board of Directors may range from six to twenty members
and may increase or decrease only by a majority vote of the
directors then in office; (iii) Board vacancies, including an
increase in the number of directors, can be filled for the
remainder of the unexpired term only by a majority vote of the
Directors then in office; (iv) directors may be removed if at
least two-thirds of the directors then in office approve the
removal as well as by a majority vote of the Company's voting
stock; (v) special meeting of shareholders may be called by a
majority vote of the directors then in office or by the holders
of at least 25% of the outstanding voting stock of the Company;
(vi) shareholders shall not be entitled to take any action by
written consent in lieu of taking such action at an annual or
special meeting of shareholders; (vii) certain transactions, such
as mergers or consolidations, may be approved by the vote of at
least two-thirds of the directors then in office as well as by a
majority vote of the Company's voting stock; (viii) amendments to
the Company's Articles of Incorporation can be approved by a vote
of at least two-thirds of the directors then in office as well as
by a majority vote of the Company's voting stock; (ix) amendments
to the Company's Bylaws can be approved by the Board of Directors
or by the shareholders at a duly constituted meeting, where such
action by the Board of Directors requires the vote of two-thirds
of the directors then in office or the affirmative vote of
holders of at least two-thirds of the outstanding voting stock of
the Company; and (x) the issuance of preferred stock described in
the previous paragraph, which may also be deemed to have an "anti-
takeover" effect.
The Company filed a Registration Statement on Form SB-1 with
the Securities and Exchange Commission offering for sale (i) a
minimum of 243,638 units, each consisting of one share of the
Company's $.01 par value common stock plus one warrant to
purchase up to one additional share of common stock and (ii) a
minimum of 780,000 and a maximum of 1,116,362 shares of its $.01
par value common stock (the "Offering"). The Registration
Statement became effective February 9, 1999. The sales price for
each unit and for each share of common stock is $5.50. All
subscription proceeds are held by an Escrow Agent, pending
acceptance of subscriptions and completion of the Offering. If
the sale of the minimum (1,023,638) units and shares of common
stock is not accomplished by the expiration date, as extended,
all subscriptions will be canceled and all proceeds returned,
without interest, to the subscribers. If the sale of the minimum
(1,023,638) units and shares of common stock is accomplished and
all regulatory approvals obtained, the Company will capitalize
the Bank with at least $5.0 million immediately prior to
commencement of banking operations. As of June 30, 1999,
proceeds from the subscription of 663,706 shares were collected
and held by the escrow agent.
Certain organizers of the Company will receive a warrant, or
a portion thereof, for each share of common stock purchased by
that organizer. The number of warrants received will be
determined by both the number of shares purchased by that
organizer and the number of shares sold in the Offering. If the
minimum offering is sold, the organizers will receive
approximately .75 warrants for each share purchased, increasing
ratably up to a maximum of one warrant per each share purchased
if the maximum offering is sold. Each warrant entitles its
holder to purchase one share of the Company's common stock for
$5.50 for a period of ten years from the date the Bank opens for
business. The warrants will vest over a period of three years,
at one-third per year and beginning on the first anniversary from
commencement of banking operations. In addition to the passage
of time, the vesting of warrants requires each organizer to
attend a minimum of 75% of the Board of Directors meetings for
each year during the vesting period. All warrants, however, will
become vested upon the change of control of the Bank or the sale
by the Bank of all or substantially all of its assets. All
warrants are subject to approval by the banking regulatory
agencies.
The Company is a development stage enterprise as defined by
the Financial Accounting Standards Board Statement No. 7,
"Accounting and Reporting by Development Stage Enterprises," as
it devotes substantially all its efforts to establishing a new
business, its planned principal operations have not commenced and
there has been no significant revenue from the planned principal
operations.
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 three-month and six-month
periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31,
1999. These statements should be read in conjunction with the
financial statements and footnotes thereto for the year ended
December 31, 1998.
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting. The accounting and reporting policies
of the Company conform to generally accepted accounting
principles and to general practices in the banking industry. The
Company uses the accrual basis of accounting by recognizing
revenues when they are earned and expenses in the period
incurred, without regard to the time of receipt or payment of
cash. The Company has adopted a fiscal year that ends on
December 31, effective for the period ended December 31, 1998.
Organizational Expenses. Organizational costs are costs
that have been incurred in the expectation that they will
generate future revenues or otherwise benefit periods after the
Company reaches the operating stage. Organizational costs
generally include incorporation, legal and accounting fees
incurred in connection with establishing the Company. In
accordance with recent accounting pronouncements, all
organizational expenses were expensed when incurred.
Deferred Registration Costs. Deferred registration costs
are deferred and incremental costs incurred by the Company in
connection with the issuance of its own stock. Deferred
registration costs do not include any allocation of salaries,
overhead or similar costs. In a successful offering, deferred
registration costs are deducted from the Company's paid-in-
capital account. Registration costs associated with an
unsuccessful offering are charged to operations in the period
during which the offering is deemed unsuccessful.
Income Taxes. The Company will be subject to taxation
whenever taxable income is generated. As of June 30, 1999 and
December 31, 1998, no income taxes had been accrued since no
taxable income had been generated.
Basic Income (Loss) Per Share. Basic income (loss) per
share is based on 21,600 shares outstanding, and amounted to
$(5.49) for the six-month periods ended June 30, 1999. Since
there were no shares outstanding at June 30, 1998, earnings per
share information is not applicable. Note that the above result
is not indicative of future performance since planned principal
operations have not commenced.
Statement of Cash Flows. The statement of cash flows was
prepared using the indirect method. Under this method, net loss
was reconciled to net cash flows from pre-operating activities by
adjusting for the effects of current assets and short term
liabilities.
Note 3 - Commitments and Contingencies
In connection with the Company's formation and the
organization of its subsidiary Bank, the Company has entered into
three separate agreements with a bank consulting firm, a law firm
and an accounting firm to assist it in: (i) preparing and filing
all organizational and incorporation papers; (ii) preparing and
filing applications with the bank regulatory authorities
concerning the formation of a bank holding company and the
organization of a State chartered bank; (iii) preparing a
Registration Statement on Form SB-1, including the financial
audit and filing same with the Securities and Exchange
Commission; and (iv) drafting of employment agreements, stock
option plans and other matters relating to compensation. The
aggregate cost of the above services is estimated to approximate
$118,000 and may vary depending upon the degree of complexity and
time spent on the above projects.
On June 8, 1998, the Company entered into an agreement (the
"Consulting Agreement") with one of its organizers who will serve
as the Company's and the Bank's President and Chief Executive
Officer (the "CEO"). The Consulting Agreement, which commenced
June 15, 1998, is for a term of the earlier of (i) twelve months
or (ii) the date the Bank is no longer in the organization period
and has opened for business. Under the terms of the Consulting
Agreement, the CEO, for his services and efforts relating to
organizational matters of the Bank and the Company, is to be paid
$5,000 monthly until the Bank application is filed with the
regulators, $6,000 monthly until the minimum number shares of
stock is sold in the Offering and $8,000 monthly until the Bank
is opened. The Consulting Agreement provides for other customary
benefits, such as health, life and disability insurance. Also,
upon the Bank's opening for business, the CEO will receive a
$16,000 bonus. The CEO is currently being paid through an
employee leasing arrangement funded by the Company.
On October 28, 1998, the Company and the above CEO entered
into an employment agreement (the "Employment Agreement") which
will become effective when the Consulting Agreement terminates.
However, if the Consulting Agreement is extended, then the
Employment Agreement is effective at the earlier of commencement
of banking operations or December 31, 1999. The Employment
Agreement provides for an annual salary of $96,000 plus an annual
percentage increase identical to the increase in the Consumer
Price Index. In addition, the CEO may receive a performance
bonus ranging from 10% to 50% of his annual base salary if
certain performance objectives are met. The CEO would also be
entitled to other customary benefits such as annual vacation,
medical and life insurance, etc. The Employment Agreement also
provides for the granting of stock options to purchase shares
equal to 3% of the total shares sold in the Offering. The
options would vest ratably over a five-year period, with an
exercise price of $5.50 and an expiration date of ten years from
the date of issue.
The organizers as a group capitalized the Company by
acquiring 21,600 shares of the Company's common stock for an
aggregate amount of $108,000. Additionally, several organizers
subscribed for an additional 4,200 shares for an aggregate price
of $21,000. The organizers paid these funds subsequent to the
date of these financial statements but prior to the issuance of
this report. All shares purchased (21,600) or subscribed (4,200)
by the organizers will be redeemed and $129,000 will be returned
to the organizers once the minimum Offering is satisfied.
On September 30, 1998, the Company entered into an agreement
to purchase a 1.05 acre parcel for $407,500. The land will be
used as the site for the proposed Bank's main office. An earnest
money deposit in the amount of $10,000 has been deposited with an
escrow agent and is reflected under "other assets" in the
Company's Balance sheet at June 30, 1999 and December 31, 1998.
An additional $40,000 was paid in late June, 1999 and is included
under "property and equipment". Assuming all contingencies, such
as regulatory approvals to operate both a holding company and a
bank, are satisfied, the final transaction to purchase the site
should be completed no later than July 14, 1999. The proposed
Bank intends to build a one-story facility with approximately
5,000 square feet (expandable to 7,000 square feet) of finished
space. Total construction costs are estimated at $665,000 with
an additional estimate of $258,000 for furniture and equipment.
On October 8, 1998, the Company entered into a one-year
lease arrangement, with a minimum of nine months, covering office
space from which it currently operates. Additional space was
leased during the first quarter of 1999 under similar
arrangements. The total monthly lease expense is $845.
Please refer to Note 1 concerning warrants to organizers.
Note 4 - Related Party Transactions
Please refer to Note 1 for a discussion concerning the
organizers' warrants.
Please refer to Note 3 for discussions concerning:
(i) The CEO's Consulting Agreement and
Employment Agreement, and;
(ii) The organizers' stock subscriptions and
purchases, as well as their stock redemptions.
Note 5 - Notes Payable
In order to fund expenses incurred during the organizational
stage, the Company obtained a loan from an unrelated financial
institution in the amount of $300,000 and in the form of a one-
year non-revolving line of credit. The line of credit carries a
variable interest rate of prime minus 1%, with interest payable
monthly. As of June 30, 1999 and December 31, 1998, the Company
had drawn from the line of credit the amounts of $299,840 and
$109,000, respectively.
On March 18, 1999, the Company obtained a second loan from
the above financial institution in the amount of $100,000 and in
the form of a line of credit. The second line of credit matures
October 31, 1999 and carries a variable interest rate of prime
minus 1%, with interest payable monthly. As of June 30, 1999,
the Company had drawn from the line of credit the amount of
$65,000.
The collateral for both loans includes the Company's furniture,
equipment and leasehold improvements, as well as the personal
guarantees of certain organizers.
On June 28, 1999, the Company obtained a $400,000 loan in
the form of a line of credit to purchase the site from which the
proposed Bank will operate. The loan matures September 15, 1999
and carries an interest rate of prime minus 1%, with interest
payable monthly. As of June 30, 1999, $40,000 had been drawn on
this line of credit.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which
the Company or the Bank is a party or of which any of their
property is the subject.
Item 2. Changes in Securities.
(a) None.
(b) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Registrant filed a Registration Statement on Form SB-
1 with the Securities and Exchange Commission, which Registration
Statement became effective February 9, 1999. Pursuant to the
Registration Statement, a minimum of 780,000 shares of common
stock, par value $.01 per share (the "Common Stock") and 243,638
units, each unit consisting of one share of Common Stock and one
warrant to purchase one share of Common Stock (the "Units," or
singly, a "Unit"), and a maximum of 1,116,362 shares of Common
Stock and 243,658 Units, were registered for sale at an offering
price of $5.50 per share or Unit. As of August 11, 1999,
Registrant has received subscriptions for all 243,638 Units and
523,785 shares of Common Stock. Registrant continues to solicit
subscriptions for shares of Common Stock pursuant to the
offering.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended June 30, 1999.
SIGNATURES
Pursuant to the requirements 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.
HORIZON BANCORPORATION, INC.
(Registrant)
Date: August 13, 1999 BY: /S/
----------------------------------
Charles S. Conoley
President and Chief Executive Officer
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