SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB-A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________.
Commission File Number 000-18887
COLONIAL TRUST COMPANY
----------------------
(Exact name of registrant as specified in its charter)
Arizona 75-2294862
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(State of Incorporation) (IRS Employer Identification
Number)
5336 North 19th Avenue
Phoenix, Arizona 85015
----------------------
(Address of principal executive offices)
602-242-5507
(Registrant's telephone number)
NONE
----
(Former name, address and 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 X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes No
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<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: 7,007,402
Transitional Small Business Disclosure Format (check one):
Yes No X
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2
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COLONIAL TRUST COMPANY
INDEX
Page
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Part I. Financial Information:
Item 1: Financial Statements 4
Condensed Balance Sheets 4
Condensed Statements of Operations 5
Condensed Statements of Cash Flows 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Part II. Other Information
Item 1: Legal Proceedings 14
Item 2: Changes in Securities 14
Item 3: Default Upon Senior Securities 14
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 5: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14
SIGNATURES
3
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COLONIAL TRUST COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets
September 30, 1995 and March 31, 1995
September 30, 1995 March 31, 1995
ASSETS (Unaudited)
------------------ --------------
Cash and cash equivalents $ 128,959 132,349
Note receivable 322,960 310,262
Property, furniture and equipment, net 630,222 608,390
Other assets 106,861 99,807
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$1,189,002 1,150,808
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and
accrued liabilities $ 26,708 26,479
Income taxes payable 9,058 23,836
Deferred income taxes 17,742 19,434
---------- ---------
53,508 69,749
Stockholders' equity:
Common stock, no par value;
10,000,000 shares authorized,
7,007,402 issued and outstanding 500,000 500,000
Additional paid-in capital 390,889 390,889
Retained earnings 244,605 190,170
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Total stockholders' equity 1,135,494 1,081,059
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$1,189,002 1,150,808
========== =========
See accompanying notes to condensed financial statements.
4
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COLONIAL TRUST COMPANY
Condensed Statements of Operations (Unaudited)
Three-month periods ended Six-month periods ended
September 30, September 30,
1995 1994 1995 1994
-------- ------- ------- -------
Revenues from trust services:
Bond servicing income $219,766 146,089 409,924 275,296
IRA servicing fees 37,350 16,708 90,321 56,436
Interest income 8,117 13,168 16,614 25,320
-------- ------- ------- -------
Total revenue 265,233 175,965 516,859 357,052
======== ======= ======= =======
General and administrative
expenses 219,585 126,497 425,441 248,493
-------- ------- ------- -------
Income before income taxes 45,648 49,468 91,418 108,559
-------- ------- ------- -------
Income taxes 18,716 20,505 37,024 34,864
Net income $ 26,932 28,963 54,394 73,695
======== ======= ======= =======
Net income per common share $ .004 .004 .008 .011
======== ======= ======= =======
See accompanying notes to condensed financial statements.
5
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COLONIAL TRUST COMPANY
Condensed Statements of Cash Flows (Unaudited)
Six-month periods
ended September 30,
1995 1994
-------- -------
Cash flows from operating activities:
Net income $ 54,394 73,695
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and Amortization 21,619 16,293
Decrease in other assets (7,053) (2,190)
Increase (decrease) in accounts payable,
accrued liabilities and taxes payable (16,242) (31,508)
-------- ---------
Net cash provided by operating activities 52,718 56,290
Cash flows from investing activities:
Sale of furniture & equipment (43,410) (7,719)
Repayment (purchase) of note receivable (12,698) 129,583
Increase in trust obligations 0 1,333,005
-------- ---------
Net cash provided by (used in)
investing activities (56,108) 1,454,869
-------- ---------
Increase (decrease) in cash
and cash equivalents (3,390) 1,511,159
Cash and cash equivalents at beginning
of period 132,349 701,658
-------- ---------
Cash and cash equivalents at
end of period $128,959 2,212,817
======== =========
See accompanying notes to condensed financial statements.
6
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COLONIAL TRUST COMPANY
Notes to Condensed Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Business
Colonial Trust Company (the Company) was incorporated on August 15,
1989 in the State of Arizona for the purpose of engaging in the
business of acting as a fiduciary. The Company is domiciled in the
State of Arizona, is regulated by the Arizona State Banking
Department, and its Common Stock is registered under the Securities
Exchange Act of 1934.
The Company serves as trustee under various bond indentures for
issuers of bonds in 24 states. The issuers are primarily churches and
other non-profit organizations. As trustee, the Company receives,
holds, invests, and disburses the bond proceeds as directed by the
applicable trust indenture and receives weekly or monthly sinking fund
payments from the issuer of the bonds, and in turn, pays the
semi-annual principal and interest payments to the bondholders.
The Company also serves as trustee of self-directed individual
retirement accounts for certain bondholders or employees of religious
organizations.
(b) Revenue Recognition
Under the trust indentures with organizations issuing bonds, the
Company, for its services, principally earns revenues based on three
fee structures. The first fee structure allows the Company to invest
trust funds held for disbursement and retain the gains and earnings
therefrom. The second fee structure requires the issuing institution
to pay a percentage of the bond proceeds to the Company for set-up and
printing costs during the first year. Additionally, an annual
maintenance fee is required each succeeding year. The third fee
structure entitles the Company to interest earnings up to 2.5% of
daily trust funds held in bond program fund accounts in lieu of a
set-up fee. Annual maintenance fees and bond printing costs are
charged as a percentage of the related bond issuance.
7
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COLONIAL TRUST COMPANY
Notes to Condensed Financial Statements
The Company also receives fees for services provided as custodian for
self-directed individual retirement accounts.
The profitability of the Company is dependent upon the ability of
investment bankers to originate bond programs for which the Company
serves as trustee.
(c) Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities at the date of purchase of three months or less to be cash
equivalents.
(d) Property and Equipment
Property and equipment is recorded at cost less accumulated
depreciation. Depreciation on furniture and equipment is recorded on
the straight-line method over the estimated useful lives of the assets
ranging from 3 to 7 years. The Company's building is depreciated over
39.5 years using the straight-line method.
(e) Organizational Costs
Certain costs incurred in the organization of the Company have been
capitalized. These costs are being amortized using the straight-line
method over five years.
(f) Income Taxes
In February, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," which requires a change from the
deferred method of accounting for income taxes of APB 11 to the asset
and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amount of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the
8
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COLONIAL TRUST COMPANY
Notes to Condensed Financial Statements
years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
period that includes the enactment date. Effective April 1, 1993, the
Company adopted Statement 109. There was no significant cumulative
effect on the financial position of the Company resulting from this
change in accounting for income taxes.
(g) Computation of Net Income Per Common Share
Income per share included in the financial statements is based on
7,007,402 shares of Common Stock outstanding. There were no share
equivalents or other potentially dilutive securities outstanding
during any of the years presented.
2. NOTE RECEIVABLE
On December 1, 1990, the Company entered into a Master Note and Letter
Agreement with Church Loans. The Master Note, in the maximum amount of
$1,000,000, is due on demand, bears interest payable monthly at 1% less
than the prime rate and is unsecured. Amounts advanced from time to time
may be prepaid and reborrowed.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
September 30, 1995 March 31, 1995
------------------ --------------
Land $157,241 157,241
Building 375,991 366,897
Furniture 54,476 42,188
Equipment 164,058 142,031
-------- -------
751,766 708,357
Less accumulated depreciation 121,544 99,967
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$630,222 608,390
======== =======
9
<PAGE>
COLONIAL TRUST COMPANY
Notes to Condensed Financial Statements
4. LEASE COMMITMENTS
The Company leases certain office equipment under various nonterminable
lease arrangements. The Company is also party to an office lease for
commercial office space formerly occupied by the Company. On March 15,
1995, the Company assigned its rights and obligations under the office
lease to an unrelated third party. The Company is liable for rent and other
obligations under the lease in the event the assignee defaults under the
office lease. The office lease terminates on September 30, 1996.
5. INCOME TAXES
As discussed in Note 1, the Company adopted Statement 109 as of April 1,
1993. There was no significant cumulative effect of that change in the
method of accounting for income taxes.
6. TRANSACTIONS WITH RELATED PARTIES
Other assets includes $5,000 due from an employee at September 30, 1995 and
March 31, 1995, respectively. The amount due the Company bears interest at
6.5%.
7. CONTINGENCIES
The Company is involved in lawsuits and claims incidental to the ordinary
course of its operations. In the opinion of management, based on
consultation with legal counsel, the effect of such matters will not have a
materially adverse effect on the Company's financial position. Therefore,
no provision has been made in the accompanying financial statements for
losses, if any, that might result from these matters.
10
<PAGE>
COLONIAL TRUST COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Under Arizona law, the Company must at all times have net capital of at
least $500,000. Therefore, its liquidity needs must be met by the capital of the
Company which is in excess of the net capital requirements. At this time, there
are no other sources of capital or liquidity available to the Company, other
than income earned and received by the Company. There are no plans, at this
time, for the Company to borrow or attempt to borrow funds or to issue any
additional capital stock in order to raise cash or capital. Management believes
that income from future operations together with existing liquidity and capital
resources of the Company will be sufficient to meet the needs of the Company,
and that existing capital would be sufficient even in the event of a loss from
operations for several months, although there may be no assurance in either
regard.
During the six-month period ended September 30, 1995, the Company's note
receivable increased from $310,262 on March 31, 1995 to $322,960 on September
30, 1995. The increase in the note receivable was primarily attributable to the
reinvestment of retained earnings in the note receivable. The Company's property
and equipment increased from $608,390 on March 31, 1995 to $630,222 on September
30, 1995. The increase was primarily due to the purchase of additional
furniture, equipment and computer software used by additional staff hired by the
Company
Management does not anticipate any major, extraordinary needs for capital
resources. The Company's present staffing and equipment should be sufficient to
meet its immediate needs. Any increases in such staffing or equipment would only
be as a result of increases in business, which increased business should
generate sufficient income from which to make any additional required
expenditures.
RESULTS OF OPERATIONS-THREE-MONTH AND SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995
The Company reported decreases in net income for both the three-month and
six-month periods ended September 30, 1995 compared to comparable prior periods.
The Company had net income of $28,804, or $.004 per share, for the three-month
period ended September 30, 1995, compared to net income of 28,963, or $.004 per
share, for the three-month period ended September 30, 1994. The Company
recognized net income of $63,452, or $.009 per share, for the six-month period
ended September 30, 1995, compared to net income of $73,695, or $.011 per share,
for the six-month period ended September 30, 1994. The Company
11
<PAGE>
had total revenue of $265,233 for the three-month period ended September 30,
1995, compared to total revenue of $175,965 for the three-month period ended
September 30, 1994. The Company had total revenue of $516,859 for the six-month
period ended September 30, 1995, compared to total revenue of $357,052 for the
six-month period ended September 30, 1994.
The Company's bond servicing income increased to $219,766 for the
three-month period ended September 30, 1995, compared to $146,089 for the
three-month period ended September 30, 1994. The Company's bond servicing income
increased to $409,924 for the six-month period ended September 30, 1995,
compared to $275,296 for the six-month period ended September 30, 1994. The
increases were primarily attributable to the increase in the number of bond
issues for which the Company serves as Trustee and Paying Agent. As of September
30, 1995, the Company was serving as trustee for the benefit of bondholders on
290 bond offerings totaling approximately $211,277,875 in original principal
amount, compared to September 30, 1994, when the Company was serving as trustee
for the benefit of bondholders on 215 bond offerings totaling approximately
156,000,000 in original principal amount. Income from the Company's Individual
Retirement Accounts increased to $37,350 for the three-month period ended
September 30, 1995, compared to $16,708 for the three-month period ended
September 30, 1994. Individual Retirement Account income increased to $90,321
for the six-month period ended September 30, 1995, compared to $56,436 for the
six-month period ended September 30, 1994. This increase was due primarily to an
increase in the number of IRA accounts serviced by the Company. As of September
30, 1995, the Company was serving as trustee for 3,997 self-directed Individual
Retirement Accounts with total assets of approximately $62,000,000, compared to
September 30, 1994, when the Company was serving as trustee for 1,984
self-directed Individual Retirement Accounts with total assets of approximately
$27,000,000. Interest income decreased to $8,117 for the three-month period
ended September 30, 1995, compared to $13,168 for the three-month period ended
September 30, 1994. Interest income decreased to $16,614 for the six-month
period ended September 30, 1995, compared to 25,320 for the six-month period
ended September 30, 1994. The decreases were primarily attributable to the
reduction of cash and cash equivalents as a result of the Company's cash
purchase of an office building on March 15, 1995, which serves as the Company's
executive offices.
General and administrative expenses increased to $219,585 for the
three-month period ended September 30, 1995, compared to $126,497 for the
three-month period ended September 30, 1994. General and administrative expenses
increased to $425,441 for the six-month period ended September 30, 1995,
compared to $248,493 for the comparable prior period. These increases were due
primarily to the addition of seven staff members and additional expenses related
to the purchase of the office building.
12
<PAGE>
The Company's income tax rate was 41% and 40.5% for the three-month and
six-month periods ended September 30, 1995, compared to 41% and 32% for the
three-month and six-month periods ended September 30, 1994. These decreases were
due to the Company's decreased net income and the tax requirements related to
such decreases.
13
<PAGE>
COLONIAL TRUST COMPANY
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None.
ITEM 2: CHANGES IN SECURITIES
None.
ITEM 3: DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: None.
(b) Reports on Form 8-K:
On November 3, 1995, the Company completed its acquisition of Camelback
Trust Company ("Camelback"), an Arizona corporation headquartered in Scottsdale,
Arizona which serves as trustee for individual and corporate accounts, pursuant
to the terms of a Stock Purchase Agreement dated October 13, 1995 between the
Company and Camelback. The Company filed a Current Report on Form 8-K dated
November 6, 1995 in regards to the Camelback acquisition. The Company intends to
file an amendment to such Form 8-K to include the financial statements and other
financial information required by Form 8-K at the earliest date such financial
statements and other financial information become available, or in any event on
or before January 16, 1996.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLONIAL TRUST COMPANY
DATE: March 26, 1997 BY: /s/ John K. Johnson
-------------- ----------------------------------
John K. Johnson
Its: President (Principal
Executive Officer)
DATE: March 26, 1997 BY: /s/ Cecil E. Glovier
-------------- ----------------------------------
Cecil E. Glovier
Its: Chief Financial Officer
(Principal Accounting Officer)
15
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 128,959
<SECURITIES> 0
<RECEIVABLES> 322,960
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 558,780
<PP&E> 751,766
<DEPRECIATION> (121,544)
<TOTAL-ASSETS> 1,189,002
<CURRENT-LIABILITIES> 53,508
<BONDS> 0
0
0
<COMMON> 500,000
<OTHER-SE> 635,494
<TOTAL-LIABILITY-AND-EQUITY> 1,189,002
<SALES> 516,859
<TOTAL-REVENUES> 516,859
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 425,441
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 91,418
<INCOME-TAX> 37,024
<INCOME-CONTINUING> 54,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,394
<EPS-PRIMARY> .008
<EPS-DILUTED> .008
</TABLE>
