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 June 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 of (I. R. S. Employer
Identification No.)
incorporation or organization)
SUITE 225, ENOREE BUILDING
111 EXECUTIVE CENTER DRIVE
COLUMBIA, SOUTH CAROLINA 29210
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (803) 798-4064
Indicate by check 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), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of the registrant's only class of voting
stock as of June 30, 1995 was 293,353.
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 & Jeffcoat.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Loan application activities have fallen off somewhat during
the quarter covered by this report. One (1) application and
one (1) increase were approved for a total amount of $449,000.00.
Two (2) loans were disbursed in the amount of $345,000.00.
Several other applications are awaiting additional information
before consideration.
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 were no defaults upon senior securities during
the quarter covered by this report.
Item 4. Other Information
There is no additional information to be reported that
is not reported in other items of this report.
Item 6. Exhibits and Reports on Form 8-K
A. The following exhibits are furnished in compliance with
Item 601 of Regulation S-K:
1. Amendment to Lease between Koger Office Parks,
Inc. and the registrant.
B. 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
Date: 8/8/95
Vern F. Amick, President
Date: 8/8/95
Louise G. Skinner
Assistant Secretary & Assistant Treasurer
<PAGE>
BUSINESS DEVELOPMENT CORPORATION
OF SOUTH CAROLINA
COLUMBIA, S.C.
JUNE 30, 1995
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 June 30, 1995,
and the related statements of income, retained earnings, and cash
flows for the periods ended June 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 March 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.
<PAGE>
June 28, 1995
EXHIBIT A
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
BALANCE SHEET
JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
June 30, December 31,
1995 1994
Assets
<S> <C> <C>
Cash $ 706,907 $ 125,820
Loans Receivable 21,683,281 22,403,166
Less: Guaranteed Portion of Loans Sold
15,221,503 (15,385,897)
Loans Receivable 6,461,778 7,017,269
Less: Allowance for Doubtful Accounts
(291,629) (225,911)
Total Loans Receivable 6,170,149 6,791,358
Accrued Interest Receivable 46,221 45,613
Other Receivables 135 698
Prepaid Expenses 2,466 2,396
Deferred Income Taxes 29,956 29,956
Prepaid Income Taxes 8,808 -0-
Furniture and Fixtures 65,484 58,639
Less: Accumulated Depreciation (37,515) (33,208)
Total Furniture and Fixtures 27,969 25,431
Total Assets 6,992,611 7,021,272
Liabilities and Equity
Accounts Payable, Withholdings
and Accrued Expenses 15,965 23,974
Due to Participating Lenders 2,446 -0-
Loan Commitment Fees Due SBA 49,800 105,192
Accrued Income Taxes -0- 33,839
Notes Payable to Members 3,157,820 3,157,820
Accrued Interest Payable 106,917 98,455
Dividends Payable 5,708 6,540
Notes Payable - Other 2,979 4,604
Total Liabilities 3,341,635 3,430,424
Stockholder's Equity
Capital Stock (Common, Par Value $10 Per
Share-1,000,000-Authorized; 293,353
Issued and Outstanding) 2,868,244 2,868,244
Capital Surplus 298,171 298,171
Retained Earnings 484,561 424,433
Total Stockholder's Equity 3,650,976 3,590,848
Total Liabilities and Equity 6,992,611 7,021,272
</TABLE>
[FN]
The accompanying notes to financial statements are an integral part of
this statement.
See Accountants' Review Report
EXHIBIT B
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
STATEMENT OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND YEAR ENDED DECEMBER 31, 1994
Six Months
Ended Year Ended
June 30, December 31,
1995 1994
<TABLE>
<S> <C> <C>
Retained Earnings - Beginning $ 424,433 $ 378,363
Net Income - Exhibit C 60,128 112,625
Transfers to Capital Surplus -0- (66,555)
Retained Earnings - Ending 484,561 424,433
</TABLE>
[FN]
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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Period Ended June 30,
1995 1994
<TABLE>
<S> <C> <C>
Investment Income and Expenses
Interest and Service Charges on Loans $ 463,953 $ 317,020
Less: Interest on Notes Payable
to Members and Short Term Notes (144,155) (128,395)
Net Interest on Loans 319,798 188,625
Interest on Temporary Investments 15,485 29,731
Provision for Doubtful Accounts (65,500) (15,001)
Net Investment Income 269,783 203,355
Other Income
Miscellaneous Income 1,039 16,571
Management Fees 22,000 4,200
Gain on Sales of SBA Guaranteed
Portion of Loans 32,454 50,408
Total Other Income 55,493 71,179
Total Income 325,276 274,534
General and Administrative Expense
Salaries 140,732 112,743
Insurance 4,715 2,534
Taxes and Licenses 14,536 9,548
Office Expense 13,093 10,561
Directors' and Loan Committee Fees 9,792 8,600
Travel, Entertainment and Conventions 9,595 9,268
Telephone 3,412 2,362
Rent 10,312 10,025
Depreciation 4,627 3,530
Professional Services 11,150 12,797
Retirement Plan Expense 11,098 9,828
Other Interest 179 254
Miscellaneous 6,715 11,366
Total General and Administrative 239,956 203,416
Income Before Income Taxes 85,320 71,118
Provision for Income Taxes 25,192 19,362
Net Income 60,128 51,756
</TABLE>
[FN]
The accompanying notes to financial statements are an integral part of
this statement.
See Accountants' Review Report
EXHIBIT D
BUSINESS DEVELOPMENT CORPORATION OF SOUTH CAROLINA
COLUMBIA, S.C.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Period Ended June 30,
1995 1994
<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 60,128 $ 51,756
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities
Depreciation 4,627 3,530
Gain on Sale of Fixed Assets (20) -0-
(Increase) Decrease in Loans Receivable
(Net Portion) 621,209 (830,380)
(Increase) Decrease in Accrued
Interest Receivable (608) (26,566)
(Increase) Decrease in Other Receivables 563 (5,631)
(Increase) Decrease in Prepaid Expenses and Taxes (70) 10,599
Increase (Decrease) in Accounts Payable (4,541) (29,164)
Increase (Decrease) in Amounts Due
Particpating Lenders (1,022)
Increase (Decrease) in Loan Commitment Fees (55,392) 27,377
Increase (Decrease) in Accrued Interest
Expense 8,462 15,704
Increase (Decrease) in Accrued Income Taxes (42,647) 4,620
Increase (Decrease) in Dividends Payable (832) -0-
Net Cash Provided (Used) By Operating Activities 589,857 (778,155)
Cash Flows From Investing Activities
Purchase of Fixed Assets (7,245) (2,725)
Proceeds from Sale of Fixed Assets 100 -0-
Net Cash Provided (Used) By Investing Activities (7,145) (2,725)
Cash Flows From Financing Activities
Proceeds from Short Term Borrowing -0- 1,250,000
Repayment of Short-Term Borrowing -0- (1,250,000)
Repayment of Long-Term Debt (1,625) (1,625)
Proceeds from Long Term Borrowings -0- 414,997
Net Proceeds from Sale of Stock -0- 2,039,942
Net Cash Provided (Used) By Financing
Activities (1,625) 2,453,314
Net Increase (Decrease) in Cash 581,087 1,672,434
Cash - Beginning 125,820 173,695
Cash - Ending 706,907 1,846,129
\</TABLE>
[FN]
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
JUNE 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 $6,461,778 at June
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 June 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
JUNE 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 June
30, 1995 and December 31, 1994, was $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 June 30, 1995 and December 31,
1994, there were no balances outstanding.
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 June 30, 1995 and December 31,
1994 was $4,857 and $6,245, respectively.
At June 30, 1995, the prime rate was 9.0%.
The following is a schedule by years for maturities of
long term debt:
Period Ended
June 30,
1996 $ 402,978
1997 400,000
1998 400,000
1999 400,000
2000 and later 1,557,821
Total 3,160,799
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
JUNE 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
June 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 percent 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 June
30, 1995 for leased property totalled $13,258.
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 June 30,
1995 1994
Interest Paid $ 135,872 $ 112,945
Income Taxes Paid 67,839 9,500
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 June 30,
1995 and 1994, CDCSC paid Business Development Corporation
$22,000 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
JUNE 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>
April 18, 1995
Mr. Vern Amick
Business Development Corporation of SC
111 Executive Center Drive
Columbia, SC 29210
CERTIFIED LETTER
Dear Mr. Amick:
The lease for this office at the Columbia Koger Office Park
provides for the rental to be adjusted annually in proportion to
the increase in the U. S. Consumer Price Index. The following
calculations were used to compute this increase.
Mar 1995 147.8 June 1992 140.2 1.0542
Mo & Yr. CPI Base Mo. & Yr. CPI Equals
1.0542 x 12.55 = 13.23
Base Rent/SF Adj. S. F. Rate
13.23 x 1590 / 12 = $ 1,752.97
Adj. S. F. Rate S. F. Leased Adjusted Monthly Rental
Effective June 1, 1995 your monthly rental will be $ 1,752.97.
We have enjoyed our association over the past and pledge our
continued efforts to provide quality services. If you have any
questions, please contact me anytime.
Sincerely,
L. Harvin Bullock
General Manager
<PAGE>
