<PAGE> 1
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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, 1995
[ ] 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: 0-10147
SAN DIEGO BANCORP
(Exact name of registrant as specified in its charter)
California 95-355578
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3335 South 900 East, Suite 230, Salt Lake City, Utah 84106
(Address of principal executive offices) (Zip Code)
(801) 467-5339
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), Yes [ ] No [X] and (2) has
been
subject to such filing requirements for the past 90 days. Yes [X] No[ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding as of September 30, 1995
----- ------------------------------------
Common Stock, No Par Value 10,280,408
EXPLANATORY NOTE: THIS REPORT IS BEING FILED ON OR ABOUT AUGUST 5, 1996,
WHICH IS BEYOND THE DATE ON WHICH THE REPORT WOULD HAVE BEEN TIMELY FILED AND
DOES NOT CONTAIN INFORMATION CONCERNING EVENTS OCCURRING SUBSEQUENT TO
SEPTEMBER 30, 1995.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of September 30, 1995, and
the related audited balance sheet of the Company as of December 31, 1994, the
unaudited related statements of operations and cash flows for the three and
nine month periods ended September 30, 1995 and 1994, and the unaudited
statement of stockholders' equity for the three month periods ended September
30, 1994 and 1995, are attached hereto and incorporated herein by this
reference.
Operating results for the quarter ended September 30, 1995, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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General
San Diego Bancorp (SDBC) was incorporated under the laws of the State of
California on May 19, 1979, for the primary purpose of acting as a bank
holding corporation for several subsidiaries, and the principal business was
in the industrial loan market conducted through a subsidiary named El Camino
Thrift and Loan Association. During several years preceding 1986, SDBC
incurred substantial losses and during 1986 management decided to discontinue
all operating activities, and liquidate the remaining assets and liabilities.
The subsidiaries were either dissolved or sold for nominal amounts, and SDBC
became a "shell" corporation by December 31, 1986, and had no material
operations until September, 1993. On September 21, 1993, SDBC acquired 100%
of the outstanding common stock of Enviro-Guard Corporation (a corporation
incorporated in the State of Utah on May 30, 1991) from Enviro-Guard Holding
Corporation (a corporation incorporated in the State of Colorado on June 10,
1987). This transaction was accounted for as a reverse acquisition whereby
the acquired corporation (Enviro-Guard Corporation) gains controlling
stockholder interest in the acquiring corporation (SDBC), and the financial
statements of Enviro-Guard Corporation are presented on a continuous basis
since inception in May of 1991.
Enviro-Guard Corporation has developed a line of organically-based
insecticide products made from natural compounds with the objective of
achieving environmentally-friendly, yet effective results. In August of 1992,
Enviro-Guard acquired 100% of the outstanding common stock of Diatect
International, Inc. (Diatect), (incorporated in the State of Kansas in 1989).
Diatect has developed and owns the rights to three EPA registered
insecticides. Also in August of 1992, Enviro-Guard acquired 100% of the
outstanding common stock of
<PAGE> 3
D.S.D., Inc. (incorporated in the State of Kansas in 1982). The principal
business activity of D.S.D., Inc., is the manufacturing and sale of cattle
dusters and mineral feeders as well as the blending and sale of various
agricultural related insecticides.
On December 18, 1992, Enviro-Guard Corporation completed negotiations to
acquire 90.14% of the outstanding common stock (891,250 shares) of White
Mountain Mining and Manufacturing, Inc. ("White Mountain") (an Idaho
Corporation). White Mountain owns 83 unpatented BLM mining claims located in
Malheur County, Oregon. The purpose of this acquisition of the mining
property is for Enviro-Guard Corporation to have a source of diatomite, which
is an important organic ingredient for its environmentally-safe insecticides.
On December 30, 1993, SDBC acquired 100% of the outstanding common stock
of Actagro Acquisition, Inc., (formerly Actagro, Inc.). Actagro Acquisition,
Inc., is a California corporation which manufactures and sells organic based
agricultural fertilizer to customers in the Southern San Joaquin Valley. On
December 6, 1994, SDBC divested itself of Actagro. In the divestiture, the
shareholders of Actagro returned 715,063 shares of SDBC common stock for
cancellation.
With the acquisition and subsequent divestiture of Actagro Acquisition,
Inc. in 1993 and 1994, respectively, a comparison of prior periods with the
three and nine month periods ended September 31, 1995, is of limited benefit
in understanding the Company's financial position.
Ability of the Company to Continue as a Going Concern
For the nine-month period ended September 30, 1995, the Company has
incurred a consolidated net loss of $605,077. In addition, at September 30,
1995, current liabilities exceeded current assets by $1,152,553. During the
first nine months of 1995, the Company converted $407,679 in accrued salaries,
marketing expenses and other liabilities to equity by offering shares of
common stock. In the future, management anticipates the conversion of an
additional $600,000 in debt (principally notes payable and accruals) to equity
during fiscal years 1995 and 1996. The Company also believes that without
additional conversions of debt to equity and restructuring the payment terms
of short-term debt, substantial doubt remains as to the Company's ability to
meet its current obligations and continue in business. The Company has taken
steps to address its insolvency problems by working with its creditors to keep
them informed of the Company's progress in meeting outstanding liabilities.
For the most part, the Company's creditors have been patient, waiting for
payment at a future date.
The Company is attempting to obtain additional working capital from
several sources, including investment banking firms, private investors and
state funding agencies interested in assisting growing companies within the
agri-environmental sector. Management intends to obtain equity financing
through the sale of the Company's securities.
The Company must meet monthly operational expenses of approximately
$85,000. Currently, the Company is unable to meet this amount. However,
management believes that additional revenue generated by the marketing sales
of its Enviro-Guard and Diatect product line will ultimately alleviate a
substantial portion of the shortfall. Until those revenues eventuate, the
Company is dependent upon outside funding to sustain it.
<PAGE> 4
Results from Operations
During the fiscal quarter ended September 30, 1995, the Company had
revenues of $126,426, cost of sales of $87,501, operating expenses of
$210,334, other income of $11,893 and an income tax benefit of $13,660. These
yielded a net loss of $145,856, compared to a net loss of $481,135 (which
included Actagro) for the same period of 1994. The substantial portion of the
second quarter 1995 loss was due to two factors: the seasonal downturn in
agriculture related product sales and depreciation and amortization expense
($67,761). The Company believes that many of the operating and administrative
expenses associated with the third quarter loss were due, in part, to
insufficient cash flow and the illiquid nature of the Company's non-current
assets.
For the nine month period ended September 30, 1995, the company had
consolidated revenues of $498,812. The net loss for the period totaled
$605,077.
Management is hopeful that once its Diatect products are in the
marketplace, the losses from operations the Company currently suffers will be
alleviated by increased sales revenue and profitability. Currently, the
Company
has not had the working capital to effectively market its products.
Liquidity and Capital Resources
The Company has a severe working capital deficit. As of September 30,
1995, the Company's working capital deficit totaled $1,152,553 compared with
$1,182,199 at December 31, 1994. The Company has current liabilities totaling
$1,339,616 and no long term debt at September 30, 1995, a decrease of $70,682
from the end of the prior quarter.. At the end of 1994, current liabilities
and long term debt were $1,261,626 and $120,228, respectively. The Company's
working capital deficit continues to have a direct correlation with the
Company's inability to expand and market its products effectively.
If the Company is unable to obtain some funds in the near future, it will
not be able to continue in business. The Company, therefore, continues to
seek working capital from several sources, including equity markets and
private investors. There is no assurance, however, that these efforts will be
successful. The Company does feel that it will increase revenues from
operations as it moves from the development stage of its products, which has
included lengthy and costly time in obtaining EPA approval. With
Enviro-Guard's products in the market place and with adequate financial
support, the Company anticipates revenues to offset on-gong expenses. The
Company is uncertain, however, as to whether there will be sufficient revenues
to cover prior years' obligations.
As previously stated, the Company's lack of cash has affected its ability
to effectively market Enviro-Guard's products. The marketing strategy will
require funds to be fully effect. Accordingly, although the Company
anticipates more revenue from its products then it has received in the past,
it will not be as profitable as it could be with additional funding for full
implementation of its marketing and promotional plans.
<PAGE> 5
On April 20, 1995, Diatect International, Inc. a subsidiary of the
Company, entered into a marketing and sub-registration agreement with Organic
Solutions, Inc. a Texas corporation. The Marketing and Sub-registration
Agreement is for a period of two-years and allows Organic Solutions to
sub-register 3 of Diatect's existing EPA approved product labels. During the
term of the contract Organic Solutions is required to purchase twelve truck
loads (approximately 40,000 lbs. per truckload) of product. In addition,
Organic Solutions will pay costs associated with the packaging of the product.
During the three month period ended September 30, 1995, Organic Solutions
has obtained EPA sub-registration approval for Diatect International's
products and has begun the process of registering the sub-registered products
in the individual states.
<PAGE> 6
FINANCIAL STATEMENTS
SAN DIEGO BANCORP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION> (Unaudited) December 31,
Sept. 30, 1995 1994
-------------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 10,335
Accounts receivable 83,774 17,980
Advances to employees 396 276
Inventories 85,391 57,882
Prepaid expenses 7,167 3,289
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Total Current Assets 187,063 79,427
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PROPERTY, PLANT AND EQUIPMENT
Building and Lease Hold Improvements 27,119 314,218
Mining property 4,387,929 4,440,543
Equipment 270,281 270,279
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Total Property, Plant and Equipment 4,685,329 5,025,040
Less accumulated depreciation 242,835 251,377
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Net Property, Plant and Equipment 4,442,494 4,773,663
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OTHER ASSETS
Investment in EPA labels, Net of amortization 3,583,444 3,804,364
Notes receivable 250,000 250,150
Deposits 150 467
Other assets 1,009 1,029
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Total Other Assets 3,834,603 4,056,010
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TOTAL ASSETS $ 8,464,160 $ 8,909,100
============ ============
</TABLE>
<PAGE> 7
SAN DIEGO BANCORP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION> (Unaudited) December 31,
Sept. 30, 1995 1994
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LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 166,257 $ 165,474
Bank overdraft - 1,847
Dealer deposits 11,288 10,625
Interest payable 115,494 113,090
Income taxes payable 33,563 33,563
Other accrued liabilities 52,588 29,134
Notes payable 645,904 505,561
Current portion of long-term debt 314,522 402,332
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Total Current Liabilities 1,339,616 1,261,626
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LONG-TERM LIABILITIES
Long-Term debt, less current portion - 120,228
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DEFERRED TAX LIABILITY 1,253,258 1,458,563
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COMMITMENTS - -
MINORITY INTEREST 340,215 340,215
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STOCKHOLDERS' EQUITY
Common stock, no par value; 20,000,000 shares
authorized; 10,280,408 and 8,203,267 shares
issued and outstanding, respectively 8,925,950 8,550,140
Common stock subscribed 229,319 197,450
Accumulated deficit (3,624,198) (3,019,122)
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Total Stockholder's Equity 5,531,071 5,728,468
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,464,160 $ 8,909,100
=========== ===========
</TABLE>
<PAGE> 8
SAN DIEGO BANCORP
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 126,426 $ 898,365 $ 498,812 $5,781,046
COST OF SALES 87,501 519,008 260,739 3,149,222
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GROSS PROFIT 38,925 379,357 238,073 2,631,824
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OPERATING EXPENSES
Salaries, wages and benefits 67,761 225,024 214,758 1,162,943
Consulting 1,900 80,767 43,059 202,914
Research and development 32,522 137,441
Travel 8,870 61,301 32,460 195,085
Rent 3,800 33,653 17,341 121,097
Interest 12,810 138,367 45,052 367,132
Utilities 3,100 23,283 9,122 59,497
Depreciation and amortization 60,754 141,828 184,131 367,097
Business Development and Promotion 3,424 5,069 90,277 10,193
Office 8,088 63,089 26,411 229,106
Taxes and licenses 16,882 14,931 21,325 26,509
Professional fees 4,196 23,928 119,753 220,787
Repairs and Maintenance 2,848 13,548 7,338 102,779
Miscellaneous 15,901 53,261 47,256 136,421
--------- ---------- ---------- ----------
Total Operating Expenses 210,334 910,571 858,283 3,339,001
--------- ---------- ---------- ----------
OPERATING (LOSS) (171,409) (531,214) (620,210) (707,177)
OTHER INCOME (LOSS)
Gain (loss) on sale of property 1,473 (107,859)
Interest/Income 4,062 32,343 12,526 58,451
Miscellaneous 6,358 17,736 9,577 46,710
--------- ---------- ---------- ----------
Total Other Income (Loss) 11,893 50,079 (85,756) 105,161
--------- ---------- ---------- ----------
(LOSS) BEFORE INCOME TAX BENEFIT (159,516) (481,135) (705,966) (602,016)
INCOME TAX BENEFIT 13,660 100,889
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NET (LOSS) $(145,856) $ (481,135) $ (605,077) $ (602,016)
========= ========== ========== ==========
NET (LOSS) PER SHARE (Primary) $ (.014) $ (.059) $ (.0059) $ (.082)
========= ========== ========== =========
</TABLE>
<PAGE> 9
SAN DIEGO BANCORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE MONTH
PERIODS ENDED SEPTEMBER 30, 1994 AND 1995
<TABLE>
<CAPTION>
Common Stock Common Stock Accumulated
Shares Amount Subscribed Deficit Total
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances as of June 30,
1994 8,009,853 $ 9,687,296 $ 305,394 $(1,369,640) $ 8,623,050
Stock Options exercised at
prices ranging from $.50
to $1.50 225,826 214,195 214,195
Conversion of Common Stock
Subscribed 109,225 130,197 (130,197) 0
Net (Loss) (481,135) (481,135)
---------- ---------- ---------- ---------- ----------
Balances as of September
30, 1994 8,344,904 $10,031,688 175,197 (1,850,775) 8,356,110
========== =========== ========== ========== ==========
Balances as of June 30,
1995 10,280,408 $ 8,925,950 $ 83,500 $(3,478,342) $ 5,531,108
Common Stock Subscribed
for accrued salaries,
wages and marketing expense 145,819 145,819
Net (Loss) (145,856) (145,856)
---------- ---------- ---------- ----------- ----------
Balances as of September
30, 1995 10,280,408 $8,925,950 $ 229,319 $(3,624,198) $ 5,531,071
========== =========== ========== ========== ==========
</TABLE>
<PAGE> 10
SAN DIEGO BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTH
PERIODS ENDED SEPTEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION> FOR THE FOR THE
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (145,856) $ (481,135) $(605,076) $(602,016)
Add items not requiring the use of cash:
Depreciation, amortization and non-cash
expenses 60,754 141,828 160,580 315,142
(Decrease) increase in accounts receivable 25,408 1,054,443 (65,774) 18,145
(Increase) decrease in advances (1,000) (120) (492)
(Increase) in interest receivable (253) (748)
(Increase) decrease in income tax receivable (8,188) 48,386
(Increase) decrease in inventories (7,509) 50,087 (27,509) (60,683)
(Increase) decrease in deposits (200) 2,939
(Increase) decrease in prepaid expenses 12,405 (6,500) (58,581)
Increase (decrease) in accounts payable (9,989) 19,185 783 (306,647)
(Decrease) in deferred tax liability (48,465) (205,305)
(Decrease) in accrued compensation (94,477) (119,142) (94,477) (367,305)
Increase (decrease) in interest payable 12,788 (1,301) 2,404 98,132
Increase (decrease) in other accrued liabilities 10,999 (7,306) 118,594 (4,436)
---------- ---------- ---------- ---------
NET CASH FLOWS USED FROM OPERATING ACTIVITIES (196,547) 659,623 (719,461) (921,103)
---------- ---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
(Acquisition) reduction in property,
plant and equipment 17,536 (184,745) 339,711 (314,599)
(Increase) decrease of notes receivable (4,229) 150 (250,000)
(Increase) reduction of intangibles 17,266 51,798 (11,182)
---------- ---------- ---------- ---------
NET CASH FLOWS PROVIDED (USED)
FROM INVESTING ACTIVITIES 34,802 (188,974) 391,659 (575,781)
---------- ---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 145,819 344,392 407,679 1,598,719
Net proceeds (reductions) from notes payable 10,000 (798,202) 140,343 (108,582)
(Decrease) in long term debt (208,038)
---------- ---------- ---------- ---------
NET CASH FLOWS PROVIDED (USED) FROM
FINANCING ACTIVITIES 155,819 (453,810) 339,984 1,490,137
---------- ---------- ---------- ---------
TOTAL INCREASE (DECREASE) IN CASH (5,926) 16,839 12,182 (6,747)
CASH AT BEGINNING OF PERIOD 16,261 102,201 (1,847) 125,787
---------- ---------- ---------- ---------
CASH AT END OF PERIOD $ 10,335 $ 119,040 $ 10,335 $ 119,040
========== ========== ========== =========
</TABLE>
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
The condensed consolidated financial statements of San Diego Bancorp
included herein have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Although, certain
information normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted,
San Diego Bancorp believes that the disclosures are adequate to make the
information presented not misleading. The condensed consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in San Diego Bancorp's annual report on Form 10-KSB for
the fiscal year ended December 31, 1994.
The condensed consolidated financial statements included herein reflect
all normal recurring adjustments that, in the opinion of management, are
necessary for a fair representation. The results for interim periods are not
necessarily indicative of trends or of results to be expected for a full year.
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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See San Diego Bancorp's annual report on Form 10-KSB for the fiscal year
ended December 31, 1994.
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ITEM 2. CHANGES IN SECURITIES
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None.
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ITEM 3. DEFAULTS UPON SECURITIES
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None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
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ITEM 5. OTHER INFORMATION
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None.
<PAGE> 12
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits.
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
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SIGNATURES
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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.
SAN DIEGO BANCORP
(Registrant)
Dated: July 31, 1996 By/s/DALE H. CHRISTIANSEN
------------------------------------
Dale H Christiansen,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED
SEPTEMBER 30, 1995.
</LEGEND>
<CIK> 0000319124
<NAME> SAN DIEGO BANCORP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,335
<SECURITIES> 0
<RECEIVABLES> 84,170
<ALLOWANCES> 0
<INVENTORY> 85,391
<CURRENT-ASSETS> 187,063
<PP&E> 4,685,329
<DEPRECIATION> 242,835
<TOTAL-ASSETS> 8,464,160
<CURRENT-LIABILITIES> 1,229,616
<BONDS> 0
0
0
<COMMON> 9,155,269
<OTHER-SE> (3,624,198)
<TOTAL-LIABILITY-AND-EQUITY> 8,464,160
<SALES> 498,812
<TOTAL-REVENUES> 528,682
<CGS> 260,739
<TOTAL-COSTS> 819,525
<OTHER-EXPENSES> 109,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,052
<INCOME-PRETAX> (705,966)
<INCOME-TAX> (100,889)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (605,077)
<EPS-PRIMARY> (0.059)
<EPS-DILUTED> (0.059)
</TABLE>
