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 March 31, 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
------------------------------------------------
(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 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 March 31, 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 (Uaudited)
ASSETS
- ------
March 31, December 31,
1999 1998
--------- ------------
Cash $ 18,839 $ 28,799
Subscriptions receivable 21,000 21,000
Deferred registration costs (Note 2) 74,645 60,878
Property and equipment, net 43,952 4,293
Other assets 11,266 12,102
------- -------
Total Assets $169,702 $127,072
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Interest payable $ - - $ 601
Note payable (Note 5) 212,750 109,000
------- -------
Total Liabilities $212,750 $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 (172,048) (111,529)
-------- --------
Total Stockholders' Equity (43,048) 17,471
Total Liabilities and ------- --------
Stockholders, Equity $169,702 $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 March 31,
--------------------
1999 1998
---- ----
Revenues:
Interest income $ 11,505
-------
Total revenues 11,505
-------
Expenses:
Employee leasing $ 31,259 Company
Organizational expenses 25,261
Insurance expense 2,177 was
Interest expense 2,554
Rent expense 2,290 not
Advertising & promotional 812
Miscellaneous other expenses 7,671 operational
-------
Total expenses $ 72,024
-------
Net (loss) $(60,519)
=======
Basic (loss) per share (Note 2) $ (2.80)
==========
Refer to notes to the financial statements.
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Statements of Income (Unaudited)
For the three months
ended March 31,
--------------------
1999 1998
---- ----
Cash flows from pre-operating
activities of the development stage:
Net (loss) (60,519)
Adjustments to reconcile net (loss) to
net cash used by pre-operating activities Company
of the development stage:
(Increase) in deferred registration costs (13,767) was
(Decrease) in accounts payable (601)
Decrease in other assets 1,601 not
Net cash used by pre-operating -------
activities of the development stage $(73,286) operational
-------
Cash flows from investing activities
Purchase of fixed assets $(40,424)
-------
Net cash used in investing activities $(40,424)
-------
Cash flows from financing activities:
Increase in borrowings $103,750
-------
Net cash provided from financing activities $103,750
-------
Net (decrease) in cash $ (9,960)
Cash at beginning of period 28,799
-------
Cash at end of period $ 18,839
=======
Supplemental disclosures of cash flow information;
Cash paid for:
Interest $ 2,554
=======
Income taxes $ - -
=======
Refer to notes to the financial statements
Horizon Bancorporation, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Unaudited)
March 31, 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 transactions undertaken by Manasota
are reflected in the Company's financial statements as of March
31, 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 March 31, 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.
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
March 31, 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 meetings
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, must be approved by the affirmative vote of
holders of at least two-thirds Company's voting stock, unless
two-thirds of the directors then in office have approved such
transaction, in which case the affirmative vote of a majority of
such holders is required; (viii) amendments to the Company's
Articles of Incorporation must be approved by the affirmative
vote of holders of at least two-thirds 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
subject to repeal by 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 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 approval obtained, the Company will capitalize the
Bank with at least $5.0 million immediately prior to commencement
of banking operations. As of March 31, 1999, proceeds from the
subscription of 321,808 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 warrant 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.
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting.
- -------------------
The accounting anti 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 March 31, 1999 and December 31, 1998,
no income taxes had been accrued since no taxable income had been
generated.
Basic (Loss) Per Share.
- ----------------------
Basic loss per share of $(2.80) is based on 21,600 shares
outstanding. 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 pro-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 there 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 Banks 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 March 31, 1999 and December 32, 1998.
An additional $40,000 is due upon local government approval of
the site plan and usage. 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 I 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 - Note 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 an
interest rate of prime minus 1% with interest payable monthly.
The collateral includes the Company's furniture, equipment and
leasehold improvements, as well the personal guarantees of
certain organizers. As of March 31, 1999 and December 31, 1998,
the Company had drawn from the line of credit the amounts of
$212,750 and $109,000, respectively.
Item 2: Management Discussion and Analysis of Financial
Condition and Results of Operation.
-----------------------------------
The Company was incorporated in the State of Florida on May
27, 1998, under the name of Manasota Group, Inc. In anticipation
of the filing for regulatory approval for the Bank, the Company
amended its Articles of Incorporation on October 2, 1998, changing
the name to Horizon Bancorporation, Inc. The Company further
amended its Articles of Incorporation to include the authorization
of additional capital stock and anti-takeover provisions typical
in the case of a bank holding company for a community bank. On
October 12, 1998, the Bank filed an application for a charter to
be granted by the Florida Department of Banking and Finance and an
application for insurance of its deposits to be issued by the
FDIC. The FDIC application was approved on May 3, 1999. Once the
charter is granted, the Company will apply to the Board of
Governors of the Federal Reserve System for authority to become a
bank holding company, and the Bank will apply to the Federal
Reserve for membership as a state member bank.
The Company 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, 1,116,362 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"),
were registered for sale at an offering price of $5.50 per share or
Unit. As of May 10, 1999, the Company has received subscriptions
for all of the Units and 271,162 shares of the Common Stock. The
Company continues to solicit subscriptions for shares of the Common
Stock pursuant to the offering.
Management hopes to secure all regulatory approvals by the end
of June 1999. Thereafter, upon the sale of a minimum of 780,000
shares of the Common Stock, the Bank will construct a 5,000 square
foot building to house its main banking facility and the Company's
headquarters at 900-53rd Avenue, East, in Bradenton, on land that is
currently under contract. During construction, which is expected to
last about six months, the Bank will operate at the site from a
temporary modular facility.
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.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
A. Exhibits:
2(a) Articles of Incorporation of Registrant (incorporated by
reference to Exhibit 2.1 of Registration Statement on
Form SB-1, File No. 333-71773)
2(b) Bylaws of Registrant (incorporated by reference to
Exhibit 2.2 of Registration Statement on Form SB-1,
File No. 333-71773)
27 Financial Data Schedule
B. Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March
31, 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: May 17, 1999 BY: /s/ Charles S. Conoley
----------------------------
Charles S. Conoley
President and Chief
Executive Officer
11
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0
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