FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1995
Commission File No. 12491
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0385775
(State or other jurisdiction (IRS Employer Identification #)
of incorporation or organization)
SUITE 225, ENOREE BUILDING
111 EXECUTIVE CENTER DRIVE
COLUMBIA, SOUTH CAROLINA 29210
(Address of principal executive office and Zip Code)
Registrant's telephone number, including area code: (803) 798-4064
Indicate by check whether the registrant has filed all reports required to be
filed by Sections 13 or 15 (d) of the Securities Act of 1934 during the
preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments for the past 90 days.
YES XX NO
The number of shares of the registrants only class of voting stock as of
September 30, 1995 was 293,353.
<PAGE>
PART I
Item 1. Financial Statements
Financial Statements meeting the requirements of Regulations S-X are
set forth in the attached report from Brittingham, Dial and Jeffcoat.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
Loan application activities have increased somewhat during the quarter covered
by this report. Four (4) applications were approved for a total of $1,800,000.
Nine (9) loans have been disbursed for a total of $5,145,895.
PART II
Item 1. Legal Proceedings
There were no legal proceedings during the quarter covered by this
report.
Item 2. Changes in Securities
There were no changes in Securities during the quarter covered by this
report.
Item 3. Defaults upon Senior Securities
There wre no defaults upon Senior Securities during the quarter covered
by this report.
Item 5. Exhibits and Reports on Form 8-K
A. No Form 8-K has been filed during the quarter of the period covered
by this report.
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.
BUSINESS DEVELOPMENT CORPORATION
OF SOUTH CAROLINA
Vern F. Amick, President
Louise G. Skinner, Asst. Secretary & Asst. Treasurer
<PAGE>
To the Board of Directors
Business Development Corporation
of South Carolina
Columbia, S.C. 29221
We have reviewed the accompanying balance sheets of Business
Development Corporation of South Carolina as of September 30, 1995,
and the related statements of income, retained earnings, and cash
flows for the periods ended September 30, 1995 and 1994, in
accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements
is the representation of the management of Business Development
Corporation of South Carolina.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying September 31, 1995 and 1994
financial statements in order for them to be in conformity with
generally accepted accounting principles.
The financial statements for the year ended December 31, 1994, were
audited by us and we expressed an unqualified opinion on them in our
report dated January 19, 1995, but we have not performed any
auditing procedures since that date.
October 23, 1995
<PAGE>
EXHIBIT A
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
September 30, December 31,
1995 1994
Assets
<C> <C>
Cash $ 39,098 $ 125,820
Loans Receivable 26,741,731 22,403,166
Less: Guaranteed Portion of Loans Sold (19,376,743) (15,385,897)
Loans Receivable 7,364,988 7,017,269
Less: Allowance for Doubtful Accounts (324,629) (225,911)
Total Loans Receivable 7,040,359 6,791,358
Accrued Interest Receivable 45,295 45,613
Other Receivables 135 698
Prepaid Expenses 3,660 2,396
Deferred Income Taxes 29,956 29,956
Furniture and Fixtures 65,484 58,639
Less: Accumulated Depreciation (39,509) (33,208)
Total Furniture and Fixtures 25,975 25,431
Total Assets 7,184,478 7,021,272
Liabilities and Equity
Accounts Payable, Withholdings
and Accrued Expenses 22,720 23,974
Due to Participating Lenders 2,026 -0-
Loan Commitment Fees Due SBA 58,008 105,192
Accrued Income Taxes 21,213 33,839
Notes Payable to Members 2,763,236 3,157,820
Notes Payable - Short Term 540,000
Accrued Interest Payable 34,067 98,455
Dividends Payable 5,708 6,540
Notes Payable - Long Term 2,167 4,604
Total Liabilities 3,449,145 3,430,424
Stockholder's Equity
Capital Stock (Common, Par Value $10 Per
Share-Authorized, Issued and
Outstanding 75,853 Shares) 2,868,244 2,868,244
Capital Surplus 298,171 298,171
Retained Earnings 568,918 424,433
Total Stockholder's Equity 3,735,333 3,590,848
Total Liabilities and Equity 7,184,478 7,021,272
The accompanying notes to financial statements are an integral part of this
statement. See Accountants' Review Report
<PAGE>
</TABLE>
EXHIBIT B
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
STATEMENT OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND YEAR ENDED DECEMBER 31, 1994
<TABLE>
Nine Months
Ended Year Ended
September 30, December 31,
<C>1995 <C> 1994
Retained Earnings - Beginning $ 424,433 $ 378,363
Net Income - Exhibit C 144,485 112,625
Transfers to Capital Surplus -0- (66,555)
Retained Earnings - Ending 568,918 424,433
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
See Accountants' Review Report
<PAGE>
EXHIBIT C
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
Period Ended September 30,
1995 1994
Investment Income and Expenses <C> <C>
Interest on Loans $ 548,316$ 424,723
Less: Interest on Notes Payable
to Members and Short Term Notes (221,366) (203,487)
Net Interest on Loans 326,950 221,236
Interest on Temporary Investments 23,612 36,941
Provision for Doubtful Accounts (95,547) (40,001)
Net Investment Income 255,015 218,176
Other Income
Miscellaneous Income 5,912 19,591
Gain on Sale of Fixed Assets 20 -0-
Management Fees 38,500 10,500
Service Fees 148,393 89,058
Gain (Loss) on Sales of SBA Guaranteed
Portion of Loans 111,150 96,484
Total Other Income 303,975 215,633
Total Income 558,990 433,809
General and Administrative Expense
Salaries 203,220 160,704
Insurance 7,356 5,240
Taxes and Licenses 19,484 13,805
Office Expense 15,069 11,926
Directors' and Loan Committee Fees 12,742 11,600
Travel, Entertainment and Conventions 13,031 13,487
Telephone 4,869 3,914
Rent 15,571 15,161
Depreciation 6,621 5,637
Professional Services 19,097 16,378
Retirement Plan Expense 15,624 13,077
Other Interest 238 375
Miscellaneous 9,370 14,535
Total General and Administrative 342,292 295,839
Income Before Income Taxes 216,698 147,970
Provision for Income Taxes 72,213 45,146
Net Income 144,485 102,824
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
See Accountants' Review Report
<PAGE>
EXHIBIT D
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
Period Ended September 30,
Cash Flows from Operating Activities <C> 1995 <C> 1994
Net Income $ 144,485 $ 102,824
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities
Depreciation 6,621 5,637
Recovery of Bad Debts 15,221
Gain on Sale of Fixed Assets (20) -0-
(Increase) Decrease in Loans Receivable
(Net Portion) (249,001) (2,101,225)
(Increase) Decrease in Accrued
Interest Receivable 318 (25,438)
(Increase) Decrease in Other Receivables 563 4,645
(Increase) Decrease in Prepaid Expenses and Taxes (1,264) 5,924
Increase (Decrease) in Accounts Payable 2,214 (18,618)
to Participating Lenders (1,442) -0-
Increase (Decrease) in Loan Commitment Fees (47,184) (19,277)
Increase (Decrease) in Accrued Interest
Expense (64,388) (41,808)
Increase (Decrease) in Accrued Income Taxes (12,626) 26,146
Increase (Decrease) in Dividends Payable (832) -0-
Net Cash Provided (Used) By Operating Activities (222,556) (2,045,969)
Cash Flows From Investing Activities
Purchase of Fixed Assets (7,245) (9,297)
Proceeds from Sale of Fixed Assets 100 -0-
Net Cash Provided (Used) By Investing Activities (7,145) (9,297)
Cash Flows From Financing Activities
Proceeds from Long Term Borrowing -0- 414,999
Net Proceeds from Sale of Stock -0- 2,039,942
Proceeds from Short Term Borrowing 1,240,000 1,515,000
Repayment of Short Term Borrowing (700,000) (1,255,000)
Repayment of Long Term Debt (397,021) (395,869)
Net Cash Provided (Used) By Financing
Activities 142,979 2,324,072
Net Increase (Decrease) in Cash (86,722) 268,806
Cash - Beginning 125,820 173,695
Cash - Ending 39,098 442,501
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
See Accountants' Review Report
<PAGE>
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 1. Organization
The corporation was established by the General Assembly of the
State of South Carolina to promote business development and to assist
new business and industry in the state by making loans or assisting in
other business transactions.
Any financial institution can be a member in the corporation and is
obligated as a member to make loan commitments to the corporation.
Loans are made by the members based on their commitment in proportion
to their capital as it relates to the capital of all members combined
who have committed.
Note 2. Summary of Significant Accounting Policies
Loans Receivable
The corporation provides an allowance for doubtful accounts which,
in the opinion of management, is adequate to cover possible loan
losses. Loans may be partially sold to investors with the corporation
retaining the obligation to service the entire debt. The balance of
loans receivable of $7,364,988 at September 30, 1995 and $7,017,269 at
December 31, 1994 is the portion of the obligations retained by
Business Development Corporation of South Carolina.
Furniture and Fixtures
The corporation carries fixed assets at cost. The straight-line
depreciation method is used with useful lives varying from five to ten
years.
Note 3. Income Taxes
The corporation is exempt from South Carolina income taxes. For
federal income tax purposes temporary differences in the basis of
assets and liabilities for financial statement and income tax
reporting occur. One difference is the use of varying methods and
periods to calculate depreciation. Also the provision for doubtful
accounts is used for financial statement purposes, whereas the direct
charge-off method is used for writing off accounts as they become
worthless for income tax purposes.
The net deferred tax benefits in the accompanying balance sheets
include the following at September 30, 1995 and December 31, 1994:
Excess of Tax over Financial
Accounting Depreciation $ (5,299)
Excess of Allowance for Doubtful
Accounts for Financial
Accounting over Tax 35,255
29,956
<PAGE>
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 4. Notes Payable
The corporation has a long term line of credit available from its
members in the amount of $7,036,340. It has one loan call outstanding
against this line. Terms of the loan require interest payable
semiannually at the prime rate plus 1/4 percent. A ten percent principal
reduction is required on August 15 of each year. The balance outstanding
at September 30, 1995 and December 31, 1994, was $2,763,236 and
$3,157,820.
The corporation also has short term lines of credit in the amount of
$1,250,000, which it utilizes to cover short term financing needs.
Interest is due semiannually at the prime rate plus 1/4 percent. At
September 30, 1995 and December 31, 1994, $540,000 and $-0- was
outstanding, respectively.
The corporation acquired data processing equipment which was financed
through a bank. The payments are $270.83 per month principal plus
interest at the rate of price plus 1%. Book value of the equipment at
September 30, 1995 and December 31, 1994 was $4,163 and $6,245,
respectively.
At September 30, 1995, the prime rate was 8.75%.
The following is a schedule by years for maturities of long term debt:
Period Ended
September 30,
1996 $ 396,751
1997 394,584
1998 394,584
1999 394,584
2000 and later 1,184,900
Total 2,765,403
Note 5. Dividends Payable
Dividends payable consist of dividends declared in prior years which
have not been presented for payment. No dividends have been declared
in the periods included in these statements.
Note 6. Capital Surplus
The legislation which established Business Development Corporation of
South Carolina requires that at least ten percent of annual earnings be
transferred to capital surplus annually up to a maximum of one-half of
the paid-in capital.
In 1987 the executive committee adopted a policy of maintaining
surplus equal to the sum of ten percent of cumulative net earnings
plus 100% of all known potential loan losses.
<PAGE>
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 6. Capital Surplus (cont'd)
Changes in Capital Surplus is summarized below:
Balance - January 1, 1994 $ 231,616
Transfer from Retained Earnings - 1994 66,555
Balance - December 31, 1994 and
September 30, 1995 298,171
Note 7. Retirement Plan
The corporation provides retirement benefits for all of its eligible
employees through a Simplified Employee Pension (SEP) equal to ten per-
cent of compensation. Under such a plan, there is no requirement for
future contributions from the corporation, or for funding past service
costs.
Note 8. Operating Leases
The corporation leases its building space and an automobile, both of
which are accounted for as operating leases. These leases expire in
1995. Payments through September 30, 1995 for leased property totalled
$19,720.
Note 9. Cash Flow Information
The corporation considers all short term investments with an original
maturity of three months or less to be cash equivalents.
Interest and income taxes paid were as follows:
Period Ended September 30,
1995 1994
Interest Paid $ 285,992 $ 246,030
Income Taxes Paid 84,839 23,257
Note 10. Stockholder's Equity
In 1994, the company completed an offering of 217,500 shares of
common stock which generated net proceeds of $2,114,942 after
deduction of issuance costs. The net proceeds were used primarily
to provide additional loans to customers.
Note 11. Related Party Transactions
During 1994, the company assisted in the formation of a non-profit
organization known as Certified Development Corporation of South Carolina
(CDCSC). This new organization will assist in making loans through Small
Business Administration loan programs. For the period ended September 30,
1995 and 1994, CDCSC paid Business Development Corporation $38,500 and
$4,200, respectively, for management fees, office space, etc. Officers of
both organizations are substantially the same.
<PAGE>
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 12. Financial Instruments
(A) Balance Sheet Financial Instruments
The carrying amount reported in the balance sheets for cash and
cash equivalents, accounts receivable and accounts payable approximates
fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amount for loans receivable and long-
term debt approximates fair value because the underlying instruments are
variable rate notes that fluctuate with the prime rate.
(B) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of loans receivable. All loans are
made to borrowers located in the State of South Carolina. Loans are
generally secured by assets, personal guarantees and are generally
partially guaranteed by the Small Business Administration.
<PAGE>
