<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number: 333-88863
OHIO LEGACY CORP
(Exact name of small business issuer as specified in its charter)
Ohio 034-1903890
---- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
132 East Liberty Street, Wooster, Ohio 44691
--------------------------------------------
(Address of principal executive offices)
(330) 263-1955
--------------
(Issuer's telephone number including area code)
The issuer has no gross revenues for its most recent fiscal quarter.
There was no voting stock held by non-affiliates of the issuer as of August 4,
2000. As of the said date, the issuer had 135 shares of common stock issued and
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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1.
<PAGE> 2
OHIO LEGACY CORP
(A Development Stage Company)
FORM 10-QSB
Quarter ended June 30, 2000
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page
BALANCE SHEETS ............................................. 3
STATEMENTS OF OPERATIONS ................................... 4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY ............... 5
STATEMENT OF CASH FLOWS .................................... 6
NOTES TO FINANCIAL STATEMENTS .............................. 7
ITEM 2 - PLAN OF OPERATIONS ...................................... 12
Part II - Other Information
OTHER INFORMATION ................................................ 14
SIGNATURES ....................................................... 15
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2.
<PAGE> 3
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
BALANCE SHEETS
June 30, 2000 and December 31, 1999
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,848 $ 116,757
Leasehold improvements 3,331 --
Furniture and equipment 59,391 --
Computer equipment and software 118,921 --
Deferred offering costs 61,112 79,552
Other assets 95,913 84,218
--------- ---------
Total assets $ 347,516 $ 280,527
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 338,750 $ 129,171
Notes payable to stockholders 440,000 135,000
--------- ---------
Total liabilities 778,750 264,171
Stockholders' equity
Common stock - no par value, 2,500,000 shares authorized;
13,500 shares issued and outstanding 135,000 135,000
Deficit accumulated during the development stage (566,234) (118,644)
--------- ---------
Total stockholders' equity (431,234) 16,356
--------- ---------
Total liabilities and stockholders' equity $ 347,516 $ 280,527
========= =========
</TABLE>
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See accompanying notes to financial statements
3.
<PAGE> 4
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 2000 and
From July 1, 1999 (Date of Inception) to June 30, 2000
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<TABLE>
<CAPTION>
Cumulative
Three Months Six Months Amounts
Ended Ended Through
June 30, 2000 June 30, 2000 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
EXPENSES
Salaries and benefits $160,541 $308,670 $339,841
Occupancy and equipment 10,105 24,250 24,250
Offering expense 2,063 67,711 67,711
Professional fees 13,016 14,095 84,015
OCC application fee -- -- 15,000
Computer Processing 5,981 5,981 5,981
Telephone, supplies and other 4,650 16,226 18,779
Interest expense 7,008 10,657 10,657
-------- -------- --------
Net loss $203,364 $447,590 $566,234
======== ======== ========
</TABLE>
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See accompanying notes to financial statements
4.
<PAGE> 5
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from July 1, 1999 (Date of Inception) to December 31, 1999 and
For the Six Months Ended June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Accumulated Stockholders'
Stock Deficit Equity
----- ------- ------
<S> <C> <C> <C>
Issuance of Common Stock $135,000 $ -- $ 135,000
Net loss July 1, 1999 (date of inception) to
December 31, 1999 -- (118,644) (118,644)
-------- --------- ---------
Balance December 31, 1999 135,000 (118,644) 16,356
Net loss for the six months ended June 30, 2000 -- (447,590) (447,590)
-------- --------- ---------
Balance June 30, 2000 $135,000 $(566,234) $(431,234)
======== ========= =========
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements
5.
<PAGE> 6
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2000 and
From July 1, 1999 (Date of Inception) to June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Six Months Amounts
Ended June 30, Through
2000 June 30, 2000
---- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(447,590) $(566,234)
Adjustments to reconcile net loss to net cash from operating
activities
Change in deferred offering costs 18,440 (61,112)
Change in other assets (11,695) (95,913)
Increase in accounts payable 209,579 338,750
--------- ---------
Net cash from operating activities (231,266) (384,509)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of premises and equipment (181,643) (181,643)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 135,000
Proceeds from notes payable to stockholders 305,000 440,000
--------- ---------
Net cash from financing activities 305,000 575,000
Net change in cash and cash equivalents (107,909) 8,848
Cash and cash equivalents at beginning of period 116,757 --
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,848 $ 8,848
========= =========
</TABLE>
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See accompanying notes to financial statements
6.
<PAGE> 7
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Ohio Legacy Corp (Corporation) at June 30, 2000, and
its results of operations and cash flows for the periods presented. The
Corporation was not incorporated until July 1, 1999. As a result, no financial
information is presented for the comparable prior year periods. All such
adjustments are normal and recurring in nature. The accompanying financial
statements have been prepared in accordance with the instructions of Form 10-QSB
and, therefore, do not purport to contain all necessary financial disclosures
required by generally accepted accounting principles that might otherwise be
necessary in the circumstances, and should be read in conjunction with the
financial statements and notes thereto of the Corporation's Annual Report for
the year ended December 31, 1999. Reference is made to the accounting policies
of the Corporation described in the notes to financial statements contained in
its December 31, 1999 financial statements. The Corporation has consistently
followed these policies in preparing this Form 10-QSB.
Organization: The Corporation was incorporated July 1, 1999, and was a
development stage company as of June 30, 2000. The Corporation has been devoting
its efforts to the offering of its common shares to the general public and to
obtaining regulatory approvals, recruiting personnel and financial planning
related to the organization of Ohio Legacy Bank. The Corporation is expected,
upon completion of a public stock offering, to purchase 100% of the common stock
of Ohio Legacy Bank, a national-chartered bank. The Corporation will file an
application to become a bank holding company with the Board of Governors of the
Federal Reserve System pursuant to the Bank Holding Company Act of 1956, as
amended.
The Corporation intends to sell between 900,000 and 1,200,000 shares of its
common stock at $10.00 per share. Each purchaser of common stock in this
offering will receive one warrant for every five common shares purchased. Each
warrant will represent the right of the holder to purchase one common share at a
price of $10.00 at any time within seven years following the opening of Ohio
Legacy Bank. The warrants may be called by the Corporation at any time after the
first year of issuance. If called, each holder of a warrant must exercise the
warrant within 30 days after such call or the warrant will expire with no
payment being made to the warrant holder. Warrants are only transferable with
the underlying common shares in increments of one warrant for every five shares
transferred. The offering is expected to raise between $8,575,000 and
$11,152,000, net of estimated underwriting commissions and offering expenses.
The Board of Directors and Executive Officers of the Corporation are expected to
own approximately 272,000 shares of common stock at $10.00 per share after the
public offering.
--------------------------------------------------------------------------------
(Continued)
7.
<PAGE> 8
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Nature of Business: The Corporation, through its subsidiary, Ohio Legacy Bank,
intends to open banking centers in Wooster and Canton, Ohio, and offer a full
range of consumer and commercial banking services to individuals and businesses
in the Wayne and Stark County, Ohio, markets.
Use of Estimates: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. Areas involving the use of management's estimates and
assumptions include the realization of deferred tax assets.
Organization and Stock Offering Costs: Costs directly associated with the
organization of the Corporation and Ohio Legacy Bank have been expensed as
incurred. Costs directly associated with preparing a previous unsuccessful stock
offering, which expired on April 14, 2000, with no continuing value to the
current stock offering, have been expensed during the three and six months ended
June 30, 2000. Costs directly associated with preparing the current stock
offering have been deferred and will be deducted from the proceeds received in
the offering. If the stock offering is not completed, any deferred costs will be
charged to operations.
Income Taxes: Income tax expense is based on the effective tax rate expected to
be applicable for the entire year. Income tax expense is the total of the
current year income tax due or refundable and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are the expected future tax
amounts for the temporary differences between the carrying amounts and tax basis
of assets and liabilities, computed using enacted tax rates. A valuation
allowance reduces deferred tax assets to the amount expected to be realized.
Comprehensive Income: Comprehensive income consists of net income (loss) and
other comprehensive income. Other comprehensive income includes items such as
unrealized gains and losses on securities available for sale and changes in
minimum pension liability, which are also recognized as separate components of
stockholders' equity. The Corporation had no other comprehensive income items
for the periods presented. As a result, comprehensive income consists only of
net loss for the periods presented.
Stock Split: As part of its initial capitalization, the Corporation sold 135
shares of common stock at a price of $1,000 per share to its nine organizing
directors, totaling $135,000. Upon full subscription of the offering and just
prior to the closing, a 100 to 1 stock split will take effect concerning the 135
common shares purchased by the organizers prior to the offering. All share
information has been retroactively adjusted to reflect the effect of the 100 to
1 stock split.
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(Continued)
8.
<PAGE> 9
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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NOTE 2 - NOTES PAYABLE TO STOCKHOLDERS
The Corporation borrowed funds from the stockholders for working capital until
completion of the public stock offering. The notes are payable upon demand and
accrue interest at the prime rate of interest at the time the borrowings
occurred.
NOTE 3 - STOCK OPTIONS
The Corporation's Board of Directors has adopted an Omnibus Stock Option, Stock
Ownership and Long-Term Incentive Plan. A total of 100,000 common shares are
available for grants under the plan. The number of shares may be adjusted by the
Board in the event of an increase or decrease in the number of common shares
outstanding resulting from dividend payments, stock splits, recapitalization,
merger, share exchange acquisition, combination or reclassification.
The following types of awards may be granted under the plan to eligible persons:
nonqualified stock options, incentive stock options and restricted stock. Under
the plan, each nonemployee Director will be granted 2,500 nonqualified options
at the time that person first becomes a Director or at the closing of the
offering. The initial option grant will vest annually in equal amounts over a
three-year term. In addition, each nonemployee Director will receive an annual
grant of 1,000 nonqualified options during his tenure on the Board, which will
vest immediately. The exercise price of an option shall not be less than the
fair market value of the underlying common stock on the date of the grant. No
options have been granted as of June 30, 2000.
In the event of a change in control of the Corporation, outstanding options may
become immediately exercisable in full at the discretion of the compensation
committee. Otherwise, all outstanding options will terminate unless the
successor corporation agrees to assume or replace such options with an
equivalent entitlement.
NOTE 4 - STOCK WARRANTS
The Corporation expects to grant up to an aggregate of 150,000 warrants to the
Board of Directors and Executive Officers of the Corporation. The warrants will
vest in approximately equal percentages each year over the initial three years
of operations. The Corporation expects to account for this stock-based
compensation under the provisions of APB No. 25 and as such will disclose the
pro forma impact of the grant on net income in accordance with SFAS No. 123.
--------------------------------------------------------------------------------
(Continued)
9.
<PAGE> 10
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
--------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Bank has entered into one-year employment agreements with its Chief
Executive Officer and President, and its Senior Loan Officer and President of
the Stark County Division. Each employment agreement will renew automatically
for an additional year unless either party furnishes at least sixty days notice
to the other of its intent to terminate the agreement. Both individuals will
receive an annual base salary of $100,000 and will be eligible for bonuses at
the Board's discretion. The agreements also entitle the employees to participate
in any formally established stock option, health insurance and other fringe
benefit plans for which management personnel are eligible. In the event of a
change in control, both parties would receive 2.99 times their annual
compensation.
The employment agreement with the Chief Executive Officer and President begins
and becomes valid when the Bank begins operations. The employment agreement with
the Senior Loan Officer and President of the Stark County Division commenced
October 6, 1999. Should the Bank not open, the contract will pay the Senior Loan
Officer and President of the Stark County Division until he finds other
employment and will make up for any short fall in salary below $100,000 during
the contract term.
The Corporation's headquarters and the Wayne County banking center will be
located at 305 West Liberty Street, Wooster, Ohio 44691. The Corporation has
entered a fifteen-year lease agreement for the property, with two five-year
renewal options, with its owner. The Corporation was required to pay the lessor
$5,000 upon execution of the lease, which is nonrefundable and does not apply
against any rent payments, as consideration for the lessors not seeking to
enforce the provisions of the lease until October 31, 1999 (grace period). The
Corporation can extend the grace period by delivering written notices at various
interim dates and making nonrefundable extension payments which total $100,000
on or before each extension deadline. Extension payments made will be credited
dollar-for-dollar against monthly rent installments. At June 30, 2000, the
Corporation has paid the $5,000 nonrefundable lease execution fee which was
expensed and included in occupancy and equipment expense and a $25,000 extension
payment which is included in other assets. The initial rent during the
construction period shall be the prime rate plus 1/2% times the
construction-financing amount. Following the initial rent, monthly rent for the
first five years will be base rent of $4,200 plus an amount equal to the monthly
payment to amortize the construction costs, which are estimated to be $550,000
over 180 months, with an interest rate of prime plus 1/2%. The base rent
increases every five years by the percentage increase in the Consumer Price
Index over the same five-year period. The lease is expected to be accounted for
as a capital lease. The capital lease for the Wayne County banking center has
not yet been recorded because construction for the facility has not started.
--------------------------------------------------------------------------------
(Continued)
10.
<PAGE> 11
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
--------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
The Stark County banking center will be located at 3900 Dressler Road in Canton,
Ohio. The Corporation has entered a ten-year lease agreement for the property
with two five-year renewal options. Annual rent payments will be $52,500 for the
first five years of the lease, with the lease increasing 15% for each renewal
term. Additionally, the Company will pay $8,000 annually for the drive-through
area for the term of the lease. The lease is expected to be accounted for as an
operating lease.
The Corporation entered into a one-year lease beginning January 1, 2000 for
temporary facilities four blocks from the permanent site at 132 East Liberty
Street, Wooster, Ohio. The temporary site will be used for administrative
purposes during the organization of Ohio Legacy Bank. Once the Bank receives its
charter, it will also be used as a branch office until the permanent site is
completed. Monthly rent is $1,895.
The Corporation entered into a month-to-month lease beginning in May 2000 for
temporary facilities in Canton to be used for administrative purposes until this
banking center is completed. Monthly rent is $485.
Rent expense for the leased facilities for the three and six months ended June
30, 2000 was $6,930 and $12,615. Estimated rental commitments under these leases
for their noncancelable periods assuming the payments begin on July 1, 2000 for
the headquarters and Stark County Banking Center, prime rate is 9.5% and the
Consumer Price Index increases by 12.98% each five years are as follows:
Year ending June 30,
2001 $ 193,194
2002 181,824
2003 181,824
2004 181,824
2005 181,824
Thereafter 1,657,519
----------
Total $2,578,009
==========
NOTE 6 - INCOME TAXES
The tax benefit of $192,520 at June 30, 2000 associated with the net operating
loss carryforwards of $566,234 has been offset with a valuation allowance as of
June 30, 2000 since the Corporation is in the development stage and has no
history of generating taxable income. The net operating loss carryforward
generated in 1999 expires December 31, 2019. Any net operating loss carryforward
generated in 2000 expires December 31, 2020.
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11.
<PAGE> 12
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
June 30, 2000
--------------------------------------------------------------------------------
ITEM 2. PLAN OF OPERATION
Some of the information in this document contains "forward-looking statements"
concerning Ohio Legacy Corp and Ohio Legacy Bank and their operations,
performance, financial condition and likelihood of success.
You can identify these statements by use of terms such as "expect," "believe,"
"goal," "plan," "intend," "estimate," "may," and "will" or similar words. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors, that could cause our actual results to differ materially from
those anticipated in these forward-looking statements.
The Corporation was established to own and hold all of the common stock of Ohio
Legacy Bank. In July and August of 1999, the organizers filed applications with
the Office of the Controller of the Currency "OCC" and with the Federal Deposit
Insurance Corporation "FDIC" to receive a national bank charter and federal
deposit insurance. The OCC and FDIC have granted preliminary regulatory
approval. Whether the OCC and FDIC grant final approval and deposit insurance
will depend upon, among other things, the Corporation's compliance with legal
requirements imposed by the OCC and the FDIC, including capitalization of Ohio
Legacy Bank with at least a specified minimum amount of capital which management
believes Ohio Legacy Bank will be able to meet. In the event these requirements
are not met, the stock offering will be terminated. Upon receipt of these final
regulatory approvals from the OCC and the FDIC, management expects to receive
final regulatory approval from the Federal Reserve to become a bank holding
company, which must be approved before the Corporation can acquire the capital
stock of Ohio Legacy Bank. Management expects to receive all final regulatory
approvals by the third quarter of 2000.
Ohio Legacy Bank's operating principle will focus on superior customer service
through knowledgeable employees and efficient operating systems and technology.
Customers will each have one employee assigned to them to serve all of their
needs, while at the same time having access to any senior manager when
necessary. Policies and procedures will be tailored to the local markets rather
than larger regional or state areas.
The directorship and management plan to focus on the small businesses within the
area, residential real estate mortgages and a growing consumer market. They will
rely on themselves, shareholders and employees for business development.
Over the next twelve to twenty-four months, Ohio Legacy Bank plans to offer
competitive products in its markets and believes it will have the cash
requirements for funding loans. Ohio Legacy Bank does not plan to pay the
highest rates on deposits, but feels it can compete with exceptional customer
service. At the same time, Ohio Legacy Bank does not expect to charge the lowest
rates and fees on its loans. Ohio Legacy Bank will work with customers to design
products and systems that will meet their individual needs, without just being
another low cost provider.
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12.
<PAGE> 13
PART I. FINANCIAL INFORMATION
OHIO LEGACY CORP
(A Development Stage Company)
June 30, 2000
--------------------------------------------------------------------------------
Assuming the securities offered in the June 2000 offering are fully subscribed,
with the exception of the exercise of warrants and options, the Company does not
anticipate any need to raise additional capital for the next three to five
years. From the proceeds of the offering, which are expected to be between
$8,575,000 and $11,152,000 after sales agent commissions and offering expenses,
between $8,035,000 and $10,612,000 will be used to capitalize Ohio Legacy Bank.
Operations of the Corporation are currently being funded by loans from the
organizers totaling $440,000 at June 30, 2000.
It is anticipated that expenditure for furniture, fixtures, and equipment will
be approximately $425,000 in the first year of operation. The largest
expenditure items will be for bank equipment such as vaults, safe deposit boxes,
ATMs, personal computers, teller equipment and leasehold improvements. These
expenditures are expected to meet our needs for the next few years.
Ohio Legacy Bank will be opened with approximately fifteen full-time employees
and five part-time employees and expect that this number of employees will be
sufficient for the first two years of operations.
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13.
<PAGE> 14
PART II. OTHER INFORMATION
OHIO LEGACY CORP
June 30, 2000
--------------------------------------------------------------------------------
Item 1 - Legal Proceedings:
-----------------
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds:
-----------------------------------------
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
-------------------------------
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
---------------------------------------------------
There are no matters required to be reported under this item.
Item 5 - Other Information:
-----------------
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
--------------------------------
(a) Exhibit 27 - Financial Data Schedule. All other documents
are incorporated by reference to the exhibits attached to the
Corporation's registration statement on Form SB-2.
(b) No current reports on Form 8-K were filed by the small
business issuer during the quarter ended June 30, 2000.
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14.
<PAGE> 15
OHIO LEGACY CORP
SIGNATURES
June 30, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
OHIO LEGACY CORP
Dated: August 4, 2000 By: /s/ L. Dwight Douce
------------------------ ----------------------------------
L. Dwight Douce, President, Chief
Executive Officer and Director
Dated: August 4, 2000 By: /s/ Paul Mederski
------------------------ ----------------------------------
Paul Mederski, Treasurer
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15.
