<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
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 number 333-87503
First National Bancshares, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 58-2466370
- ----------------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
248 N. Church Street
Spartanburg, South Carolina 29304
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
864-948-9001
-----------------------------
(Telephone Number)
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 NO XX
--
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 10 shares outstanding on
December 15, 1999
Transitional Small Business Disclosure Format (check one): YES NO XX
-- --
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of First National Bancshares, Inc. (the
"Company") are set forth in the following pages.
2
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Balance Sheet
September 30, 1999
<TABLE>
<S> <C>
ASSETS
------
Cash and cash equivalents $ 5,930
Premises and equipment, net 3,531
Deferred stock offering costs 42,411
Prepaid expenses 1,320
Other 10,000
---------
Total assets $ 63,192
=========
LIABILITIES AND ORGANIZERS' EQUITY
----------------------------------
Liabilities:
Line of credit $ 210,000
Accounts payable and accrued expenses 11,253
---------
Total liabilities 221,253
---------
Commitments and contingencies (Notes 3 and 4)
Organizers' deficit:
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized, no shares issued or outstanding --
Common stock, par value $.01 per share, 10,000,000 shares
authorized, 10 shares issued and outstanding --
Additional paid-in capital 100
Retained deficit accumulated during the development stage (158,161)
---------
Total organizers' deficit (158,061)
---------
Total liabilities and organizers' deficit $ 63,192
=========
</TABLE>
See accompanying notes to financial statements.
3
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Operations
For the Period from July 14, 1999 (date of inception)
through September 30, 1999
<TABLE>
<S> <C>
Expenses:
Salaries and payroll taxes $ 63,441
Professional fees 64,420
Insurance 932
Rent 3,900
Telephone and supplies 4,527
Application fees 15,000
Interest 2,261
Other 3,680
---------
Loss before provision for income taxes (158,161)
Provision for income taxes --
---------
Net loss $(158,161)
=========
</TABLE>
See accompanying notes to financial statements.
4
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Changes in Organizers' Deficit
For the Period from July 14, 1999 (date of inception)
through September 30, 1999
<TABLE>
<CAPTION>
RETAINED
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Proceeds from the sale of stock
to organizers 10 $ -- $100 $ -- $ 100
Net loss -- -- -- (158,161) (158,161)
------- -------------- ---- --------- ---------
Balance, September 30, 1999 10 $ -- $100 $(158,161) $(158,061)
======= ============== ==== ========= =========
</TABLE>
See accompanying notes to financial statements.
5
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Statement of Cash Flows
For the Period from July 14, 1999 (date of inception)
through September 30, 1999
<TABLE>
<S> <C>
Net cash used for pre-operating activities:
Net loss $(158,161)
Depreciation 125
Deferred stock offering costs (42,411)
Prepaid expense (1,320)
Accounts payable and accrued expenses 11,253
---------
Net cash used for pre-operating activities (190,514)
---------
Investing activities:
Purchase of premises and equipment (3,656)
Escrow deposits on land (10,000)
Net cash used in Investing activities (13,656)
---------
Financing activities:
Proceeds from borrowings on line of credit 210,000
Loans from organizers 65,000
Repayment of organizers' loans (65,000)
Proceeds from the sale of stock to organizer 100
---------
Net cash provided by financing activities 210,100
---------
Net increase in cash and cash equivalents 5,930
Cash and cash equivalents, July 14, 1999 (date of inception) --
---------
Cash and cash equivalents, end of period $ 5,930
=========
</TABLE>
See accompanying notes to financial statements.
6
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FIRST NATIONAL BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Financial Statements
September 30, 1999
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
First National Bancshares, Inc. (the "Company") is a South Carolina
corporation organized for the purpose of owning and controlling all of the
capital stock of First National Bank of Spartanburg (in organization) (the
"Bank"). The Bank is being organized as a national bank under the laws of the
United States with the purpose of becoming a new bank to be located in
Spartanburg County, South Carolina. The Bank has filed a charter application
with the OCC and an application for deposit insurance with the FDIC. The Bank
received preliminary approval from the OCC on November 10, 1999 and the Company
subsequently filed an application with the Federal Reserve to become a bank
holding company, which must be approved before the Company can acquire the
capital stock of the bank. Provided that the remaining applications are timely
approved and the necessary capital is raised, it is expected that banking
operations will commence in the first or second quarter of 2000.
The Company was formally incorporated in July 1999. We have prepared
these financial statements including financial information from April 1, 1999,
the initial financial transaction date. It was on that date that the Company's
organizers began pre-organizational activities.
The Company is a development stage enterprise as defined by Statement of
Financial Accounting Standard No. 7, "Accounting and Reporting by Development
Stage Enterprises," as it devotes substantially all its efforts to establishing
a new business. The Company's planned principal operations have not commenced
and revenue has not been recognized from the planned principal operations.
The Company is offering 1,200,000 shares of its common stock at $10 per
share. The offering will raise approximately $11,743,000, net of estimated
underwriting discounts and commissions and offering expenses. The directors and
executive officers of the Company have subscribed to purchase 462,000 shares of
common stock at $10 per share, for a total of $4,620,000. Upon purchase of these
shares, the Company will issue stock warrants to the organizers to purchase up
to an additional 307,000 shares of common stock for $10 per share. The remaining
shares are being sold through a public offering. The Company will use $11
million of the proceeds to capitalize the proposed bank.
YEAR END - The Company has adopted a fiscal year ending on December 31,
effective for the period ending December 31, 1999. The transactions
occurring prior to the Company's incorporation have been combined in
these financial statements for ease of presentation.
ESTIMATES - The financial statements include estimates and assumptions
that affect the Company's financial position, results of operations and
disclosure of contingent assets and liabilities. Actual results could
differ from these estimates.
7
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CASH EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.
The Company places its temporary cash investments with high credit
quality financial institutions. At times, such investments may be in
excess of the FDIC insurance limits.
DEFERRED STOCK OFFERING COSTS - Deferred stock offering costs are
expenses incurred by the Company in connection with the offering and
issuance of its stock. The deferred stock offering costs will be deducted
from the Company's additional paid-in capital after the stock offering.
If the stock offering is deemed unsuccessful, all deferred stock offering
costs will be charged to operations during the period in which the
offering is deemed unsuccessful.
ORGANIZATION COSTS - Organization costs include incorporation, legal and
consulting fees incurred in connection with establishing the Company and
the Bank. In accordance with Statement of Position (SOP) 98-5, "Reporting
on the Costs of Start-Up Activities," organization costs are expensed
when incurred.
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the financial reporting and income tax bases of assets and
liabilities. At September 30, 1999, no taxable income has been generated
and therefore, no tax provision has been included in these financial
statements.
3. LINE OF CREDIT
The Company has established a $500,000 line of credit with a financial
institution to fund operating expenses of the Company during the development
stage. The line is uncollateralized and is guaranteed by the organizers. The
line bears interest at the prime rate minus 1/2% and expires June 2000. As of
September 30, 1999, $210,000 was outstanding on this line of credit.
4. OTHER ASSETS
Included in other assets are two (2) $5,000 escrow deposits for
potential locations for the Bank's main office and a branch office.
5. COMMITMENTS AND CONTINGENCIES
The Company has engaged a law firm to assist in preparing and filing
all organizational, incorporation, and bank applications and to assist in
preparing stock offering documents and consummating the Company's initial
offering. The aggregate cost of the services is expected to approximate $50,000.
The Company leases temporary office space under a six month operating
lease requiring monthly payments of $650.
The Company has engaged a bank consultant to assist in establishing the
Company and the Bank. The consultant will also assist in the application
process. The aggregate cost of the services is expected to approximate $60,000,
plus expenses.
The Company has entered into an employment agreement with its president
and chief executive officer that includes a three-year compensation term, annual
bonus, incentive program, stock option plan and a one-year non-compete agreement
upon termination.
6. YEAR 2000 ISSUE
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The potential
effect of the Year 2000 issue on the Company will not be fully determinable
until the Year 2000 and thereafter. If Year 2000 modifications are not properly
completed either by the Company or entities with which the Company conducts
business, the Company's revenues and financial condition could be adversely
impacted.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following is a discussion of the Company's financial condition as of
and for the period ended September 30, 1999. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
This report 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," "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 (Registration Number
333-87503) as filed with and declared effective by the Securities and Exchange
Commission.
FINANCIAL CONDITION
The Company was organized on July 14, 1999. The Company's initial principal
activities have been related to its organization, the conducting of its initial
public offering, the pursuit of approvals from the Office of the Comptroller of
the Currency (the "OCC") and Federal Deposit Insurance Corporation (the "FDIC")
of its application to charter the Bank and to obtain deposit insurance, and the
pursuit of approvals from the Federal Reserve Board for the Company to acquire
control of the Bank. As of December 16, 1999, the Company had received
subscriptions for approximately 810,000 shares of its common stock being
offered. The subscriptions are being held in escrow pending the sale of all
1,200,000 shares of its common stock and final regulatory approval to open the
Bank. Final regulatory approval is expected in the first or second quarter of
2000.
At September 30, 1999, the Company had total assets of $63,192. These
assets consisted principally of cash of $5,930, deferred stock offering costs of
$42,411 and premises and equipment of $3,531.
The Company's liabilities at September 30, 1999 were $221,253 and consisted
of advances under a line of credit of $210,000 and accounts payable of $11,253.
The Company had an organizers' deficit of $158,061 at September 30, 1999.
The Company had a net loss of $158,161 from inception through September 30,
1999, or a pro forma net loss of $.13 per share since inception based on the
projected shares of 1,200,000 which are being offered. This loss resulted from
expenses incurred in connection with activities related to the organization of
the Company and the Bank. These activities included preparing and filing an
application with the OCC and the FDIC to charter the Bank and to obtain deposit
insurance, preparing an application with the Federal Reserve Board for approval
of the Company to acquire the Bank, responding to questions and providing
additional information to the OCC, the FDIC, and the Federal Reserve Board in
connection with the application process, preparing a prospectus and filing a
registration statement with the Securities and Exchange Commission (the "SEC"),
selling the Company's common stock, meetings and discussions among various
organizers regarding various preopening issues, hiring qualified personnel to
work for 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. Because the
Company was in the organization stage, it had no operations from which to
generate revenues.
For purposes of its charter application with the OCC, the organizers
estimated the Company's deficit when the Bank opens to be approximately
$407,000, although the actual deficit may be significantly higher or lower. The
Company believes that income from the operations of the Bank will be sufficient
to fund the activities of the Company on an ongoing basis; however, there can be
no assurance that either the Bank or the Company will achieve any particular
level of profitability.
9
<PAGE> 10
CAPABILITY OF DATA PROCESSING SOFTWARE TO ACCOMMODATE THE YEAR 2000
Like most financial institutions, we will rely upon computers for the daily
conduct of our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to
"read" the new year and there may be widespread computer malfunctions. In June
1996, the Federal Financial Institutions Examination Council alerted the banking
industry that serious challenges could be encountered with Year 2000 issues. In
addition, the OCC and the FDIC have issued guidelines to require compliance with
Year 2000 issues. In accordance with these guidelines, we have developed and are
executing a plan to ensure that our computer and telecommunication systems do
not have these Year 2000 problems.
We do not intend to open the bank until after January 1, 2000, at which
time we believe that most of the uncertainty surrounding the Year 2000 issue
should be clarified. In this event, our risks associated with computer
malfunctions should be greatly reduced, but we will still seek to ensure that
our computer systems and our major vendors' and clients' computer systems are in
compliance and functioning properly.
We will be generally relying on independent third parties for our
information processing needs. We have not entered into an agreement with a
software servicing company to provide our mission critical hardware and software
and to perform all overnight processing and reconciliation of our daily
transaction data. We will require all significant vendors to provide similar
test results and warranties regarding Year 2000 compliance. Because we have
chosen our information systems and software with the Year 2000 in mind, we do
not believe we will have any significant expenses associated with Year 2000
issues.
Since the Company does not anticipate making loans until after January 1,
2000, we do not anticipate that we will incur losses related to future loan
customers that may encounter Year 2000 problems.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 problems that could materially adversely affect our
business. However, we believe that it is not possible to determine with complete
certainty that we have identified and corrected all Year 2000 problems. The
number of devices that could be affected and the interactions among these
devices are simply too numerous. In addition, we cannot accurately predict how
many failures related to the Year 2000 problem will occur with our suppliers,
customers, or other third parties or the severity, duration, or financial
consequences of such failures. As a result, any such failures could result in
delaying the expected opening date of the Bank.
Additionally, there may be a higher than usual demand for liquidity
immediately prior to the century change due to deposit withdrawals by customers
concerned about Year 2000 issues. Because we have not accepted any deposits nor
plan to accept any deposits prior to December 31, 1999, we do not expect
liquidity to be a problem.
Contingency Plans. We have developed contingency plans to be implemented as
part of our efforts to identify and correct any Year 2000 problems affecting our
internal systems. Depending on the systems affected, these plans include (a)
accelerated replacement of affected equipment or software; (b) short term use of
backup equipment and software; (c) increased work hours for our personnel or use
of contract personnel to correct, on an accelerated schedule, any Year 2000
problems which arise; and (d) other similar approaches. If we are required to
implement any of these contingency plans, these plans could have a material
adverse effect on our business.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable
(b) Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote for the
period from July 14, 1999 (inception) through September 30, 1999.
ITEM 5. OTHER INFORMATION
On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.
The Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that the Company faces from larger institutions and other types of
companies. In fact, it is not possible to predict the full effect that the Act
will have on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.1 Articles of Incorporation (Incorporated by
reference to the Company's Registration Statement on Form SB-2
filed with the Securities Exchange Commission on September 21,
1999, File No. 333-87503)
(b) Exhibit 3.2 Bylaws (Incorporated by reference to the Company's
Registration Statement on Form SB-2 filed with the Securities
Exchange Commission on September 21, 1999, File No. 333-87503)
(c) Exhibit 27.1 - Financial Data Schedule (for SEC use only)
(d) Not applicable
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST NATIONAL BANCSHARES, INC.
Date: December 20, 1999 By: /s/ Jerry L. Calvert
------------------ ----------------------------------
Jerry L. Calvert
Chief Executive Officer
Date: December 20, 1999 By: /s/ Kitty B. Payne
------------------ ----------------------------------
Kitty B. Payne
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST NATIONAL BANCSHARES, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM SB-2 ORIGINALLY
FILED ON SEPTEMBER 21, 1999, FILE NO. 833-87503.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-14-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,930
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 63,192
<DEPOSITS> 0
<SHORT-TERM> 210,000
<LIABILITIES-OTHER> 11,253
<LONG-TERM> 0
0
0
<COMMON> 100
<OTHER-SE> (158,161)
<TOTAL-LIABILITIES-AND-EQUITY> 63,192
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,261
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 155,900
<INCOME-PRETAX> (158,161)
<INCOME-PRE-EXTRAORDINARY> (158,161)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,161)
<EPS-BASIC> (1,581)
<EPS-DILUTED> (1,581)
<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>
