U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended February 29, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 000-24498
THE BANC STOCK GROUP, INC.
(Name of small business issuer in its charter)
Florida 65-0190407
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1105 Schrock Road, Suite 437, Columbus, Ohio 43229
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (614)848-5100
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, no par value
(Title of class)
(Title of class)
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
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [x]
State issuer's revenues for its most recent fiscal year $3,266,610
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days. (See
definition of affiliate in Rule 12b-2 of the Exchange Act.)
As of March 31, 2000: 8,336,817 Class A shares
@ Bid of $2.25 = $18,757,838
@ Asked of $2.50 = $20,842,042
State the number of shares outstanding of each of the issuer's
classes of common equity, as of March 31, 2000:
Class A Shares: 8,336,817
Class C Shares: 120,000
PART I
ITEM 1: Description of Business
General
The Banc Stock Group, Inc. (the Company), is a Florida
corporation incorporated in April, 1990. The Company has three
wholly-owned subsidiary operating companies.
Banc Stock Financial Services, Inc. (BSFS), an Ohio corporation,
is a NASD (National Association of Securities Dealers) registered
broker-dealer specializing in the trading of bank stocks
nationwide. BSFS is registered with the Securities and Exchange
Commission and the securities commissions of thirty-two states,
including Ohio. BSFS trades securities on a fully-disclosed
basis and clears customer transactions through an unaffiliated
broker-dealer which also maintains the customer accounts. BSFS
is also a registered investment adviser offering advisory
accounts to qualified investors. BSFS derives a significant
portion of its revenues from providing private portfolio
management, brokerage, market making and investment banking
services. BSFS maintains a trading portfolio of community bank
stocks to support its various activities.
Heartland Advisory Group, Inc. (HAG), is a registered investment
adviser. HAG is the Investment Adviser to The Banc Stock Group
Fund, a diversified, open-end mutual fund.
Buckeye Bancstocks, Inc., is an Ohio corporation established in
1977, to act as an intrastate broker-dealer trading primarily in
Ohio bank stocks. Buckeye Bancstocks maintains a trading
portfolio of Ohio community bank stocks to support its
activities.
The Company operates primarily as a holding company with
broker/dealer operations conducted by BSFS and Buckeye Bancstocks
and investment advisory services provided by HAG and BSFS. The
Company serves as the Manager of Four Points Limited I, an Ohio
Limited Liability Company, which invests in community bank
stocks. The Company maintains a trading portfolio of community
bank stocks to support the various activities of its
subsidiaries. References to the Company also include references
to BSFS, HAG and Buckeye Bancstocks.
Historically, the Company has specialized in financial services
related to community and regional bank stocks with small and
medium market capitalization. During calendar year 1999, the
Company expanded its financial services to include asset
allocation and investment recommendations in any industry sector,
any market capitalization range, third-party money managers,
third-party mutual funds and insurance products. This expanded
scope of services allows the Company to better serve the needs of
its customers.
Market Making and Brokerage Activities
The primary business of the Company is advisory services through
its registered investment advisers and the marketing and trading
of securities, money management services and mutual funds through
its brokerage subsidiaries. The Company has one investment
representing approximately 11% of its marketable equitable
securities.
Historically, through its brokerage subsidiaries, the Company has
recommended that its customers purchase those bank stocks which
the Company believes to be most likely to show an increase in
value over both the short and the long term. Market making and
trading has been done primarily through BSFS.
Management of the Company believes that the community and
regional bank stocks which have historically shown the largest
long term market value increases have certain characteristics in
common. These include: (a) county seat banks with more than
$50,000,000 but less than $10,000,000,000 in assets; (b) banks
with strong capital (capital/assets ratios of 8% or more);
banks with high earnings (return on equity of 12% or more); and
(d) banks with low loan losses (less than 1% of loans declared
uncollectible and lost each year). Through its brokerage
subsidiaries and its research capabilities and experience, the
Company endeavors to identify banks meeting this profile. The
Company researches the entire U.S. market for these bank stocks.
Although these stocks are listed on a variety of over-the-counter
markets, including the National Quotation Bureau "Pink Sheets",
NASD Bulletin Board, NASDAQ Small-Cap Issues, NASDAQ National
Market System, AMEX and NYSE, there can be no assurances that the
stock of such banks will be available for sale or show price
increases if they are acquired.
The rate of mergers of banks has accelerated during the last ten
years, partially as a result of statewide branching and
nationwide branching law changes. Many mergers have occurred to
some degree as a result of such banking law changes.
The Company began to actively market the establishment of
discretionary client accounts with BSFS in 1997. This enables
the Company to more quickly move client funds in response to
changes in the market for securities. The Company believes that
by administering discretionary accounts, it will be able to
better serve its clientele by more rapidly responding to market
fluctuations while at the same time continuing to generate
significant fee income for the Company from discretionary and
non-discretionary accounts and advisory accounts.
The Company is applying the management experience it has gained
from over twenty years of analyzing, acquiring and marketing bank
stocks to the broader area of evaluating and recommending other
securities, money management services and mutual funds. However,
there can be no assurance that the Company will be successful in
predicting increases in the value of these financial products and
services.
Market Research
The Company's brokerage subsidiaries compile extensive research
on small and medium cap banks. The Company evaluates profit
potential of these banks stocks over one, three, five, and ten
year horizons. The Company develops a Bank Presentation or
Profile which highlights: financial performance, peer group
comparison, and geographic and demographic market factors. The
criteria utilized to evaluate these stocks include, but are not
limited to:
1. Return on Equity: Net income (loss) before
extraordinary items and other adjustments divided by
average total equity. This return should be fairly
constant at 12% - 20% per year. The Company seeks
opportunities where ROE is above 12%.
2. Return on Assets: This is calculated by
using income (loss) before extraordinary
items and other adjustments divided by
average total assets. The Company seeks
opportunities where ROA is above 1.2%.
3. Price to Earnings Ratio: P/E is calculated
by taking the current price of the stock and
dividing it by the earnings per share. The
Company seeks opportunities where the P/E is
below 13.
4. Stock Price: The Company seeks to purchase
stocks that are priced under comparably
priced stocks based upon past earnings
records.
5. Risk: Limiting, not eliminating risk is an
important consideration. The Company seeks
the shares of banks that experience low loan
losses, has strict loan guidelines, and makes
an effort to know their customers.
6. Ownership: The Company seeks well run banks
where there is significant insider ownership.
The Company believes that ten to forty
percent ownership in the hands of management,
the Board, and local shareholders, encourages
market share growth, responsibility to the
bottom line, and a customer oriented culture.
7. Dividends: Generally, the Company does not
seek high dividend returns with its
investments. However, it occasionally
invests in preferred issues that achieve a
higher than average return compared to
national or regional returns.
8. Market Area: The Company seeks stable and
growing market areas across the United
States. Community oriented banks are found
in areas of population from as small as
25,000 MSA (metropolitan statistical area) to
3-5 million MSA in some urban/suburban areas.
9. Markets: The Company's portfolio is
generally made up of stocks that trade on the
National Quotation Bureau "Pink Sheets", NASD
Bulletin Board, NASDAQ Small-Cap Issues,
NASDAQ National Market System, and
occasionally the AMEX and NYSE.
Investment criteria and analytical disciplines similar to those
applied to bank stocks are now being applied to a broader
universe of securities, money management services and mutual
funds.
Competition
National and large regional brokers tend not to emphasize the
markets in which the Company specializes because of the
relatively small size of the banks and the towns in which they
are headquartered and because the stocks of those institutions is
usually thinly covered by researchers and inactively traded.
Consequently, the major competition in the area of bank stock
marketing has been the regional brokers in its market states.
These include: Elmer E. Powell, Hoefer & Arnett, Sutro & Co.,
Howe Barnes, Ferris Baker, Stifel Nicolas, Ryan Beck, and Hill
Thompson. The Company's extensive experience, the large number
of independent community banks, and its unique method of retail
marketing causes the Company's management to believe that the
Company will be successful in identifying and acquiring stock
portfolios which match its targets.
Historically, the Company's brokerage subsidiaries have been
consulted by banks primarily as stock marketing problem solvers
and are now being invited into markets as market makers.
Although the Company probably has more competition to buy and
sell stock now than at any time in its history, management
believes that, because of the experience of the brokerage
subsidiaries in this specialized market, the Company will
continue to experience success in its areas of operations.
Competition in the area of large capitalization securities, money
management services and mutual funds is intense. Many
competitors are better known than the Company, are better
capitalized, and have more offices, employees and sales
representatives. The Company's approach to competition is to
bring a broader range of financial products and services to
customers that are attracted to the Company's specialization in
community and regional bank stocks rather than competing directly
for volume in large capitalization securities.
Trading Portfolio
Through its brokerage subsidiaries, the Company buys positions,
primarily in several banks, at any given time with an intent to
resell such shares. Any stock bought for the trading portfolio
will typically be resold, either at wholesale (to other brokers)
or at retail to the Company's clients. The Company acquires
securities from a variety of sources including other brokers,
individuals, estates and bank trust departments. The Company
maintains margin accounts with broker/dealers. These margin
accounts are secured by the respective securities held by
broker/dealers.
Investment Banking
Investment banking services are provided by the Company's NASD
Broker-Dealer subsidiary, Banc Stock Financial Services, Inc. We
specialize in working closely with a select number of banks for
new formations or re-capitalization in the $1 million to $15
million range. Investment banking services are a part of
management's strategy to diversify revenue sources.
Regulation
The securities industry is subject to extensive regulation under
both federal and state laws. The principal purpose of regulation
of broker/dealers and investment advisors is the protection of
retail investors in the securities markets rather than protection
of creditors and stockholders of broker/dealers and investment
advisors. The SEC is the federal agency charged with the
administration of federal securities laws. The Ohio Division of
Securities is a corresponding state regulatory agency. Much of
the regulation of broker/dealers who do business on an interstate
basis has been delegated by the SEC to self-regulatory
organizations, principally the NASD and the national securities
exchanges. These self-regulatory organizations adopt rules
(which are subject to approval by the SEC) which govern the
industry and conduct periodic examinations of member
broker/dealers. The SEC retains primary authority for regulation
of investment advisors. Securities firms are also subject to
regulation by state securities commissions in the states in which
they are registered and, in Ohio, the Division of Securities
regulates the activities of broker/dealers which only do business
within that State.
The regulations to which broker/dealers are subject cover all
aspects of the securities business, including sales methods,
trading practices among broker/dealers, capital structure of
securities firms, record keeping and the conduct of directors,
officers and employees. Additional legislation, changes in rules
promulgated by regulatory organizations or changes in the
interpretation or enforcement of existing laws and rules often
affect directly the method of operation and profitability of
broker/dealers. In addition, securities regulators may conduct
administrative proceedings which can result in censure, fine,
suspension or expulsion of a broker/dealer, its officers or
employees.
The Company's subsidiaries, BSFS, HAG and Buckeye Bancstocks,
each operate in highly regulated industries and are subject to
examination and licensing requirements by federal and state
authorities and subject to a variety of special rules and
regulations. BSFS is subject to regulation by the SEC and the
state securities regulatory agencies in the states in which it
operates and is a member of NASD. HAG and BSFS are registered
investment advisers and subject to regulation by the SEC pursuant
to the Investment Advisers Act of 1940. Buckeye Bancstocks is an
Ohio broker/dealer operating solely within that State. Buckeye
Bancstocks' activities are subject to examination and licensure
by the Ohio Department of Commerce and, in particular, the
Division of Securities.
Due to a change in the Ohio Securities Laws, since October 11,
1994, all broker/dealers registered in Ohio, with total revenues
of $150,000 or more during any twelve (12) month period and more
than one hundred (100) retail securities customers, must also
register as a broker/dealer with the Securities and Exchange
Commission (SEC). Buckeye Bancstocks has historically been an
Ohio broker/dealer operating solely within that state. As such,
Buckeye Bancstocks was previously exempt from registration with
the SEC but subject to regulation by the Ohio Department of
Commerce. Management believes that Buckeye Bancstocks can
continue to operate under these restrictions. Additionally,
Buckeye Bancstocks has applied for an exemption from the Ohio
requirements for SEC registration. This application is pending.
As a result of these various considerations, management believes
that these changes have not had a material adverse effect on the
Company's financial prospects as a whole.
Companies that control banking subsidiaries must register as Bank
Holding Companies, pursuant to the Bank Holding Company Act of
1956 (the "Bank Holding Company Act"). A company is considered
to be in control of a bank if (a) the company directly or
indirectly controls or has the power to vote 25% or more of any
class of voting securities of a bank; (b) the company controls in
any manner the election of a majority of directors or trustees of
a bank; or the Federal Reserve Board determines, after notice
and opportunity for hearing, that the company directly or
indirectly exercises a controlling influence over the management
or policy of a bank. Companies that hold less than 5% of the
stock of a bank are deemed not to be in control of such bank.
Neither the Company nor any of its subsidiaries controls the
election of any directors or trustees to any of the banks in
which they own an interest, nor do they own in excess of 5% of
the voting securities in any bank in which they make a market.
Violation of the Bank Holding Company Act could subject the
Company to fines and penalties. The Company will endeavor to
remain outside of the purview of the Bank Holding Company Act.
Employees
The Company currently has 16 full-time employees, none of which
are members of a union. The Company generally believes that its
relationship with employees is good.
ITEM 2: Description of Property
The Company leases a total of approximately 7,600 square feet of
office space in an office complex from an unaffiliated third
party for an aggregate current monthly rental of approximately
$9,515.
ITEM 3: Legal Proceedings
The Company is not engaged in any material litigation.
ITEM 4: Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of the
fiscal year to a vote of security holders.
PART II
ITEM 5: Market for Common Equity and Related Stockholder Matters
Effective April 12, 1999 the Company's Class A Common Stock began
trading on the NASDAQ SmallCap Market under the symbol BSGK.
Prior to that date it traded in the over-the-counter market under
the symbol BSGK. The range of high and low bid information for
each quarter within the last two fiscal years is shown below:
Beginning Date Ending Date High Bid Low Bid
March 1, 1998 May 31, 1998 $17.0000 $10.2500
June 1, 1998 August 31, 1998 $13.2500 $ 7.0000
September 1, 1998 November 30, 1998 $ 7.0000 $ 4.5000
December 1, 1998 February 28, 1999 $ 5.8750 $ 4.0000
March 1, 1999 May 31, 1999 $ 6.0000 $ 3.5000
June 1, 1999 August 31, 1999 $ 5.3125 $ 3.0000
September 1, 1999 November 30, 1999 $ 3.8750 $ 2.5000
December 1, 1999 February 29, 2000 $ 3.3750 $ 2.0000
The source of this bid information is Bloomberg L.P. These
quotations reflect inter-dealer prices, without retail markup,
markdown or commissions and may not represent actual
transactions. In addition, due to the relatively "thin" market
in the Company's Class A Common Stock, quoted prices cannot be
considered indicative of any viable market for such stock.
During the fiscal year ended February 29, 2000, approximately 1.8
million shares of the Company's Class A Common Stock were traded.
Class C shares are restricted and therefore, are not traded.
As of February 29, 2000, there were approximately 1,350 holders
of record of Class A shares and 35 holders of Class C shares.
Dividends have not been declared on any class of equity
securities.
ITEM 6: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Fiscal Year Ended February 29, 2000, Compared to Fiscal Year
Ended February 28, 1999
Revenues for the year ended February 29, 2000 decreased to
$3,266,610 compared to $3,802,353 for the year ended February 28,
1999, a decrease of 14%. This decrease results primarily from a
decrease in management fees and commissions.
Trading losses were $227,972 for the year ended February 29, 2000
compared to trading losses of $824,710 for the year ended
February 28, 1999. This represents an annual rate of return on
the average portfolio of negative 2% for the year ended February
29, 2000 compared to negative 6% for the year ended February 28,
1999. This trading loss is a direct result of the depressed
market values in the small-capitalization banking sector which
started late in the first fiscal quarter of the year ending
February 28, 1999 and continued throughout the year ended
February 29, 2000. While management of the Company believes that
its investment strategies remain sound, the Company's trading
portfolios are subject to fluctuations based on world wide equity
markets, and specifically, to volatility in the banking sector.
Management is unable to predict how future fluctuations will
impact the performance of its trading portfolios.
Management fees and commission revenue of $2,506,216 was
generated for the year ended February 29, 2000, primarily by Banc
Stock Financial Services, Inc. (BSFS), the Company's NASD
broker-dealer subsidiary. This compares to $3,411,890 of
commission revenue for the year ended February 28, 1999, a
decrease of 27%. This decrease results from the depressed market
values in the small-capitalization banking sector which has
reduced the asset base on which management fees are applied and
reduced retail trading volume which generates commission revenue.
On March 11, 1998, the Company formed a specialized investment
banking division dedicated to the expansion of independent
community banks. During the year ended February 29, 2000, the
Company generated revenue of $649,431 from investment banking
activities compared to $971,158 for the year ended February 28,
1999, a decrease of 33%. This decrease also results from the
depressed market values in the small-capitalization banking
sector which causes fewer bank formations and fewer secondary
stock offerings.
Operating expenses for the year ended February 29, 2000 decreased
to $4,016,141 compared to $4,229,443 for the year ended February
28, 1999, a decrease of 5%. Brokers' commission expenses
decreased to $1,211,532 for the year ended February 29, 2000
compared to $1,910,160 for the year ended February 28, 1999, a
decrease of 37%. The decrease in commission expenses is related
to the decrease in investment banking activities and the
management fees and commission revenue discussed above.
Salaries, benefits, and payroll taxes increased to $1,075,286 for
the year ended February 29, 2000 compared to $678,786 for the
year ended February 28, 1999, an increase of 58%. This increase
reflects management's decision to increase staffing levels to
diversify revenue sources in the future. Accrued incentive
compensation was zero for both years. Incentive compensation was
not accrued because of the net losses. Professional fees
decreased to $450,754 for the year ended February 29, 2000
compared to $468,550 for the year ended February 28, 1999, a
decrease of 4%. Interest expense decreased to $10,106 for the
year ended February 29, 2000 compared to $57,135 for the year
ended February 28, 1999, a decrease of 82%. This decrease
results from a reduction of margin positions with broker-dealers.
General and administrative expenses increased to $1,268,463 for
the year ended February 29, 2000 compared to $1,114,812 for the
year ended February 28, 1999, an increase of 14%. This increase
relates primarily to additional costs for NASDAQ and other data
services.
ShareholderOnline, Inc., is establishing an electronic bank stock
information service and alternative trading system.
ShareholderOnline is separately owned but under common management
with the Company. The Company currently holds 16% of the
outstanding common stock of ShareholderOnline. The Company's
investment is accounted for on the equity method. Equity in
ShareholderOnline's earnings was a loss of $176,040 for the year
ended February 29, 2000 compared to a loss of $52,070 for the
year ended February 28, 1999. ShareholderOnline's loss is
attributable to the depressed market values in the small-capitalization
banking sector which continued throughout the
year. These conditions affected the market value of
ShareholderOnline's portfolio of community bank stocks.
Effective December 2, 1999, the name was changed from
Shareholderdirect.com, Inc., to ShareholderOnline, Inc., formerly
named The Banc Stock Exchange of America, Inc.
Liquidity and Capital Resources
Approximately 35% of the value of the Company's trading portfolio
is comprised of small bank stocks which are not traded on
national securities markets and there can be no assurance that
more active markets will develop. The failure of such markets to
develop could negatively affect the Company's operations and
financial condition. Approximately 65% of the Company's trading
portfolio is readily marketable, providing a reasonable degree of
liquidity. Investments in securities traded on national
securities markets and securities not traded on national
securities markets, but with readily ascertainable market values
are valued at market value. Other securities for which market
quotations are not readily available, due to infrequency of
transactions, are valued at fair value as determined in good
faith by management of the Company. While management employs
objective criteria to ascertain these values, there is no
independent benchmark by which the values assigned by management
can be judged.
As of February 29, 2000, the Company had working capital of
approximately $11,110,000 compared to $12,260,000 as of February
28, 1999. Working capital includes cash, investments and
accounts and interest receivable, net of all liabilities, except
deferred taxes. The Company has no long term debt.
The Company's NASD broker-dealer subsidiary, under the
correspondent agreement with its clearing broker, has agreed to
indemnify the clearing broker from damages or losses resulting
from customer transactions. The Company is, therefore, exposed
to off-balance sheet risk of loss in the event that customers are
unable to fulfill contractual obligations. The Company manages
this risk by requiring customers to have sufficient cash in their
account before a buy order is executed and to have the subject
securities in their account before a sell order is executed. The
Company has not incurred any losses from customers unable to
fulfill contractual obligations.
In the normal course of business, the Company periodically sells
securities not yet purchased (short sales) for its own account
and writes options. The establishment of short positions and
option contracts expose the Company to off-balance sheet market
risks in the event prices change, as the Company may be obligated
to cover such positions at a loss. At February 29, 2000, the
Company had no short security positions, the Company had not
written any option contracts and did not own any options. The
Company did not experience any credit losses due to the failure
of any counterparties to perform during the year ended February
29, 2000. Senior management of the Company is responsible for
reviewing trading positions, exposures, profits and losses,
trading strategies and hedging strategies daily.
The Company's most significant industry concentration, which
arises within its normal course of business activities, is with
financial institutions for securities transactions.
The cash balance increased $2,568,939 during the year ended
February 29, 2000. Net cash provided by operating activities was
$2,589,686. The primary source of this cash flow results from
the sale of securities in the trading portfolio.
Investing activities used $57,157 of cash during the year ended
February 29, 2000 with the primary use being the purchase of
office equipment and furniture.
Financing activities provided $36,410 of cash during the year
ended February 29, 2000 primarily due to advances from affiliates
and the exercise of stock options.
The operations of the Company are funded primarily by revenue
from the trading portfolio and commission revenue. Management
believes that the Company's existing resources, including
available cash, and cash provided by operating activities will be
sufficient to satisfy its working capital requirements in the
foreseeable future. However, no assurance can be given that
additional funds will not be required. To the extent that
returns on investments are less than, or expenses are greater
than anticipated, the Company may be required to reduce its
activities, liquidate inventory or seek additional financing.
This financing may not be available on acceptable terms, if at
all. No significant capital expenditures are expected in the
foreseeable future, except that the Company, as part of its
strategic and operational planning, continues to explore options
to expand its capital base to support additional market making
activities.
Impact of Inflation and Other Factors
The Company's operations have not been significantly affected by
inflation. The Company's trading portfolios of equity
securities, primarily in the community banking sector, are
carried at current market values. Therefore, the Company's
profitability is affected by general economic and market
conditions, including volatility in the banking sector, the
volume of securities trading and fluctuations in interest rates.
The Company's business is also subject to government regulation
and changes in legal, accounting, tax and other compliance
requirements. Changes in these regulations may have a
significant effect on the Company's operations.
The Revenue Reconciliation Act of 1993 includes Mark-to-Market
Rules which essentially require dealers in securities to include
unrealized gains on the trading portfolio, in taxable income for
income tax purposes. These Rules have a materially adverse
impact on the Company's cash flow.
Forward-looking Statements
From time to time, the Company may publish forward-looking
statements relating to such matters as anticipated operating
results, prospects for new lines of business, technological
developments, economic trends (including interest rates and
market volatility), expected transactions and similar matters.
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements, and the purpose of
this paragraph is to secure the use of the safe harbor. While
the Company believes that the assumptions underlying its forward-looking
statements are reasonable, any of the assumptions could
prove to be inaccurate, and accordingly, actual results and
experiences could differ materially from the anticipated results
or other expectations expressed by the Company in its forward-looking
statements. Factors that could cause actual results or
experiences to differ from results discussed in the forward-looking
statements include, but are not limited to: economic
conditions; volatility and direction of interest rates or market
values of trading securities; governmental legislation and
regulation; and other risks identified, from time-to-time in the
Company's other public documents on file with the SEC.
ITEM 7: Financial Statements
THE BANC STOCK GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
TOGETHER WITH REPORT OF INDEPENDENT ACCOUNTANTS
Report of Independent Accountants
To the Shareholders and Board of Directors of
The Banc Stock Group, Inc.:
In our opinion, the accompanying consolidated statement of
financial condition and the related consolidated statements of
operations, of changes in shareholders' equity and of cash flows
present fairly, in all material respects, the financial position
of The Banc Stock Group, Inc. and its subsidiaries at February 29,
2000, and the results of its operations and its cash flows for
each of the two years in the period ended February 29, 2000 in
conformity with accounting principles generally
accepted in the United States. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally acepted
in the United States, which require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/PricewaterhouseCoopers LLP
Columbus, Ohio
April 14, 2000
THE BANC STOCK GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF FEBRUARY 29, 2000
ASSETS
Cash $ 2,901,271
Trading portfolio:
Marketable equity securities, at market value 7,070,030
Not readily marketable equity securities, at
estimated fair value 356,573
Mortgage participation notes, at market value 249,600
Accounts receivable:
Affiliates 18,090
Clients 62,922
Pending settlements and other 1,019,082
Refundable income taxes 257,000
Equity investment in ShareholderOnline, Inc. 350,880
Property and equipment, net of accumulated depreciation
of $223,106 200,052
Goodwill, net of accumulated amortization of $298,595 331,372
Deposits and other 219,602
Total assets $ 13,036,474
LIABILITIES
Unearned commisions $ 94,800
Accounts payable to broker-dealers and other 79,734
Accrued expenses 645,230
Deferred taxes 150,500
Total liabilities 970,264
SHAREHOLDERS' EQUITY
Preference stock, 50,000,000 shares authorized,
none issued or outstanding -
Common stock:
Class A, no par value, 149,880,000 shares authorized,
8,639,862 shares issued and 8,336,817 shares outstanding 9,317,203
Class C, no par value, 120,000 shares
authorized, issued and outstanding -
Treasury stock, at cost
(303,045 Class A shares) (385,403)
Deferred compensation (22,778)
Retained earnings (3,157,188)
Total shareholders' equity 12,066,210
Total liabilities and shareholders' equity $ 13,036,474
The accompanying notes are an integral part of these consolidated
financial statements.
THE BANC STOCK GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
2000 1999
REVENUES:
Trading losses $ (227,972) $ (824,710)
Management fees and commissions 2,506,216 3,411,890
Investment banking 649,431 971,158
Dividends 286,419 193,339
Interest and other 52,516 50,676
Total revenues 3,266,610 3,802,353
EXPENSES:
Brokers' commission 1,211,532 1,910,160
Salaries, benefits and payroll taxes 1,075,286 678,786
Professional fees 450,754 468,550
Interest 10,106 57,135
General and administrative 1,268,463 1,114,812
Total expenses 4,016,141 4,229,443
INCOME (LOSS) BEFORE TAXES (749,531) (427,090)
PROVISION FOR INCOME TAXES (380,000) (32,000)
LOSS BEFORE EQUITY IN NET EARNINGS
OF AFFILIATED COMPANY (369,531) (395,090)
Equity in net losses of ShareholderOnline, Inc. (176,040) (52,070)
NET LOSS $ (545,571) $ (447,160)
BASIC EARNINGS (LOSS) PER SHARE $ (0.06) $ (0.05)
DILUTED EARNINGS (LOSS) PER SHARE $ (0.06) $ (0.05)
The accompanying notes are an integral part of these consolidated
financial statements.
THE BANC STOCK GROUP,INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CHANGES in SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
Retained
Treasury Deferred Earnings Total
Class A Class C Stock Compensation (Deficit)
Balance 2/28/98 $9,120,368 $ - ($385,403) $ - $4,149,919 $12,884,884
Conversion of
Class C to Class
A (10% per year) - - - - - -
Exercise of
stock options 70,051 - - - - 70,051
Net loss - - - - (447,160 (447,160)
Balance 2/28/99 9,190,419 - (385,403) - 3,702,759 12,507,775
Conversion of
Class C to Class
A (10% per year) - - - - - -
Exercise of
stock options 13,600 - - - - 13,600
Fair value of stock
options and warrants
granted to independent
contractors and
consultants 90,406 - - - - 90,406
Deferred compensation
related to the fair
value of stock options
and warrants granted to
independent contractors
and consultants 22,778 - - (22,778) - -
Net loss - - - - (545,571) (545,571)
Balance 2/29/00 $9,317,203 $ - ($385,403) ($22,778) $3,157,188 $12,066,210
The accompanying notes are an integral part of these consolidated
financial statements.
THE BANC STOCK GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
FOR THE YEARS ENDED FEBRURAY 29, 2000 and FEBRUARY 28, 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (545,571) $ (447,160)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 97,659 60,023
Write off of assets - 59,446
Fair value of stock options and
warrants granted to independent
contractors and consultants, net 90,406 -
Deferred taxes (915,500) (184,000)
Equity in undistributed losses of
ShareholderOnline, Inc. 176,040 52,070
Unrealized loss 3,020,463 2,213,775
(Increase) decrease in certain assets-
Trading profits, net 1,792,974 (914,759)
Mortgage participation notes (72,600) (77,000)
Accounts receivable clients 30 (62,952)
Other accounts receivable (748,277) (165,952)
Refundable income taxes (257,000) -
Other assets (4,705) (12,614)
Increase (decrease) in certain liabilities-
Margin accounts payable to
broker-dealers - (266,907)
Unearned commissions (172,500) 90,000
Accounts payable to broker-dealers
and other 73,147 (53,113)
Accrued expenses and other 55,120 (535,103)
Net cash provided by (used in)
operating activities 2,589,686 (244,246)
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections of notes receivable - 20,697
Issuance of notes receivable - (18,568)
Collection of dividends receivable - 25,000
Purchase of property and equipment (57,157) (81,336)
Sale of property - 3,100
Net cash used in investing activities (57,157) (51,107)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 13,600 70,051
Advances from affiliates 599,424 571,228
Advances to affiliates (576,614) (485,350)
Net cash provided by financing activities 36,410 155,929
NET INCREASE (DECREASE) IN CASH 2,568,939 (139,424)
CASH, BEGINNING OF PERIOD 332,332 471,756
CASH, END OF PERIOD $ 2,901,271 $ 332,332
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 10,106 $ 57,135
Income taxes 530,000 50,000
The accompanying notes are an integral part of these consolidated
financial statements.
THE BANC STOCK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(1) ORGANIZATION AND NATURE OF BUSINESS
The Banc Stock Group, Inc., (the Company) is a Florida
corporation incorporated in April, 1990. The Company has three
wholly-owned subsidiary operating companies.
Banc Stock Financial Services, Inc. (BSFS), an Ohio corporation,
is an NASD registered broker-dealer specializing in the trading
of bank stocks nationwide.
BSFS is registered with the Securities and Exchange Commission
and the securities commissions of thirty-two states, including
Ohio. BSFS trades securities on a fully-disclosed basis and
clears customer transactions through an unaffiliated
broker-dealer which also maintains the customer accounts. BSFS
is also a registered investment adviser offering advisory
accounts to qualified investors. BSFS derives a significant
portion of its revenues from providing private portfolio
management, market making and brokerage services.
Heartland Advisory Group, Inc. (HAG), is a registered investment
adviser. HAG is the Investment Adviser to The Banc Stock Group
Fund, a diversified, open-end mutual fund.
Buckeye Bancstocks, Inc. is an Ohio corporation established in
1977 to act as an intrastate broker-dealer trading primarily in
Ohio bank stocks.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of revenues
and expenses for the period. Actual results could differ from
those estimates.
The following is a summary of the Company's significant
accounting policies:
Principles of Consolidation
The accompanying consolidated financial statements include the
operations of the Company, BSFS, HAG and Buckeye Bancstocks. All
material intercompany transactions and balances have been
eliminated in consolidation.
Cash
The Company has defined cash as demand deposits and money market
accounts.
Valuation of the Trading Portfolio
Securities and related options traded on national securities
markets and securities not traded on national securities markets,
but with readily ascertainable market values, are valued at
market value. Other securities for which market quotations are
not readily available, due to infrequency of transactions, are
valued at fair value as determined in good faith by the
management of the Company. Realized and unrealized gains and
losses are included in trading profits.
Property and Equipment
Property and equipment is carried at cost less accumulated
depreciation. Depreciation is calculated using the straight-line
method over estimated lives of five to seven years.
Goodwill
The excess purchase price over the fair market value of the net
assets acquired from Buckeye Bancstocks and BSFS is being
amortized on a straight line basis over 20 years.
Revenues
Securities transactions and commissions are accounted for on the
trade date basis. Dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. Realized gains
and losses from sales of securities are determined utilizing the
first-in, first-out method (FIFO). Investment banking revenue is
recorded upon completion of the underwriting.
Earnings Per Share
Basic and diluted earnings per common share are computed in
accordance with Statement of Financial Accounting Standards No.
128, "Earnings per Share." A reconciliation of the numerators
and denominators used in these calculations is shown below:
For the Year Ended February 29, 2000
Net Loss Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings per Share $(545,571) 8,455,277 $(.06)
Diluted Earnings per Share $(545,571) 8,455,277 $(.06)
For the Year Ended February 28, 1999
Net Loss Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings per Share $(447,160) 8,437,139 $(.05)
Diluted Earnings per Share $(447,160) 8,437,139 $(.05)
Stock options and warrants have not been included in the
denominator of the diluted per-share computations because the
effect of their inclusion would be antidilutive.
Equity Investment in ShareholderOnline, Inc.
ShareholderOnline, Inc., is establishing an electronic bank stock
information service and alternative trading system.
ShareholderOnline is under common management with the Company.
The Company currently holds 16% of the outstanding common stock.
The Company's investment is accounted for on the equity method.
Effective December 2, 1999, the name was changed from
Shareholderdirect.com, Inc., to ShareholderOnline, Inc., formerly
named The Banc Stock Exchange of America, Inc.
Fair Value of Financial Instruments
Substantially all of the Company's financial instruments, except
the equity investment in ShareholderOnline, are carried at fair
value or amounts approximating fair value. Assets, including
accounts receivable, mortgage participation notes, interest
receivable and the trading portfolio are carried at amounts which
approximate fair value. Similarly, liabilities, including
accounts payable and accrued expenses are carried at amounts
approximating fair value.
(3) CAPITAL STOCK
Common Stock
Commencing December 1, 1991, shares of Class C common stock
automatically convert to Class A common stock at the rate of
120,000 shares per year. The Class C common shares are
subordinate to Class A common stock in that Class A common stock
has a liquidation preference over the Class C common stock equal
to $1.50 per share. In all other respects, Class A and Class C
common stock have equal rights.
Treasury Stock
As of February 29, 2000, Buckeye Bancstocks held 206,240 Class A
shares of the Company. These shares, along with shares held
directly by the Company, are treated as treasury stock for
financial reporting purposes.
Authorization of Preference Stock
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of "blank check" preference stock with such
designations, rights and preferences as may be determined from
time to time by the Company's Board of Directors. The Board of
Directors is empowered, without shareholder approval, to issue
preference stock with dividend, liquidation, conversion, voting,
or other rights which could adversely affect the voting or other
rights of the holders of the common stock.
(4) TRADING PORTFOLIO
Marketable equity securities at February 29, 2000 consist of bank
stocks at market value, as follows:
Traded on national securities markets $4,816,840
Not traded on national securities
markets, but with readily ascertainable
market value 2,253,190
Total marketable equity securities $7,070,030
As of February 29, 2000, the Company had one investment
representing approximately 11% of its marketable equity
securities. Securities not readily marketable include securities
for which there is no market on a securities exchange and no
independent publicly quoted market. These securities at February
29, 2000 were $356,573 at fair value with a cost of $262,760.
(5) MARGIN ACCOUNTS PAYABLE TO BROKER-DEALERS
The Company had no margin accounts payable to broker-dealers as
of February 29, 2000, or as of February 28, 1999. These accounts
bear interest at variable rates which approximate the Broker Call
Rate. These margin accounts are secured by the securities held
by broker-dealers.
(6) RELATED PARTY TRANSACTIONS
Securities Transactions
The Company purchases from and sells securities owned to
ShareholderOnline at the prevailing market price at the time of
the transaction. There were no purchases or sales to
ShareholderOnline for the years ended February 29, 2000 and
February 28, 1999.
Operating Expenses
The Company and ShareholderOnline are under common management.
Certain expenses are paid by the Company and allocated to
ShareholderOnline based upon predetermined percentages as
approved by the officers of the Companies. Operating expenses in
the allocation are primarily salaries and benefits. Total
expenses allocated to ShareholderOnline were $164,210 and
$208,016 for the years ended February 29, 2000 and February 28,
1999, respectively.
(7) INCOME TAXES
The Company files a consolidated Federal income tax return. It
is the policy of the Parent to allocate the consolidated tax
provision to subsidiaries as if each subsidiary's tax liability
or benefit were determined on a separate company basis. As part
of the consolidated group, subsidiaries transfer to the Parent
their current Federal tax liability or assets.
The provisions for income taxes for the years ended February 29,
2000 and February 28, 1999 are composed of the following:
2000 1999
Current Federal income taxes $ 535,500 $ 152,000
Deferred Federal income taxes (915,500) (184,000)
Provision for income taxes $ (380,000) $ (32,000)
The following schedule reconciles the statutory Federal income
tax rate to the Company's effective tax rate for the years ended
February 29, 2000 and February 28, 1999:
2000 1999
Statutory Federal income tax rate (34)% (34)%
Prior year provision adjustment (10) 23
Dividends received deduction ( 9) (11)
Goodwill amortization 2 3
Other, net 2 12
Effective Federal income tax rate (49)% (7)%
Deferred tax assets and liabilities consist of the following at
February 29, 2000 and February 28, 1999:
2000 1999
Deferred tax benefit of NOL carryforward $ 600 $ 1,000
Deferred tax liabilities on unrealized gains
on securities owned (151,100) (1,067,000)
Deferred taxes, net $ (150,500) $ (1,066,000)
As of February 29, 2000, the Company and its subsidiaries had net
operating loss (NOL) carry forwards for tax purposes of
approximately $1,800. These NOL's will expire in 2008 through
2010. Any future changes in control may limit the availability
of NOL carryforwards.
(8) OPERATING LEASES
The Company leases certain facilities and a vehicle under
operating leases. Total lease expenses were approximately
$123,000 in fiscal year 2000 and $158,000 in 1999. The future
minimum lease payments under existing leases are as follows:
Amount
2001 $127,900
2002 129,700
2003 51,900
$309,500
(9) EMPLOYEE INCENTIVE PLANS
Incentive Compensation Plan
All full-time executive employees of the Company are eligible to
participate in the Incentive Compensation Plan. The Plan
provides that a bonus fund will be established in an amount equal
to 20% of the pre-tax realized profits of the Company in excess
of a 15% pre-tax return on equity. The amount of the bonus fund
is calculated each fiscal quarter on a cumulative basis. The
allocation of the bonus fund is to be made by the President of
the Company. The Company did not incur any expense under the
Plan for the years ended February 29, 2000 or February 28, 1999.
Stock Option Plan
The Company has a Non-Qualified and Incentive Stock Option Plan
which authorizes the grant of options to purchase an aggregate of
2,500,000 shares of the Company's Class A Common Stock. The Plan
provides that the Board of Directors, or a committee appointed by
the Board, may grant options and otherwise administer the Option
Plan. The exercise price of each incentive stock option or
non-qualified stock option must be at least 100% of the fair
market value of the Class A Shares at the date of grant, and no
such option may be exercisable for more than 10 years after the
date of grant. However, the exercise price of each incentive
stock option granted to any shareholder possessing more than 10%
of the combined voting power of all classes of capital stock of
the Company on the date of grant must not be less than 110% of
the fair market value on that date, and no such option may be
exercisable more than 5 years after the date of grant.
Effective March 29, 1999, 2,000 warrants which vest immediately
were granted to consultants to the Company with ten year terms
and exercise prices of $4.44.
Effective May 14, 1999, grants of 83,250 options which vest
immediately and 83,250 options which vest over five years, were
granted under this plan to employees and brokers with ten year
terms and exercise prices of $4.50.
Effective May 14, 1999, grants of 80,000 warrants which vest
immediately were granted to directors and a consultant with ten
year terms and exercise prices of $4.50.
Effective July 2, 1999, grants of 500 options which vest
immediately and 500 options which vest over five years, were
granted under this plan to a new employee with a ten year term
and exercise price of $4.375.
Effective February 29, 2000, grants of 38,500 options which vest
immediately and 38,500 options which vest over five years, were
granted under this plan to employees and brokers with ten year
terms and exercise prices of $2.25.
Effective February 29, 2000, grants of 70,000 warrants which vest
immediately were granted to directors with ten year terms and
exercise prices of $2.25.
The Company applies Accounting Principles Board Opinion 25 (APB
25) and related Interpretations in accounting for its plans. In
accordance with APB 25, no compensation cost has been recognized
for its fixed stock options issued to employees or warrants
issued to Directors. However, stock options issued to
independent contractor-brokers and warrants issued to consultants
are recorded as compensation expense of $90,406 for the year
ended February 29, 2000, based on fair value as computed in
accordance with the Black-Scholes option pricing model. Had
compensation cost for all of the Company's stock-based
compensation plans been determined based on the fair value, as
computed in accordance with Statement of Financial Accounting
Standards No. 123 (FAS 123), at the grant dates for awards under
those plans, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
February 29, 2000 February 28, 1999
Net income (loss) As reported $ (545,571) $ (447,160)
Pro forma $(1,528,850) $(3,167,681)
Basic earnings per share
As reported $(.06) $(.05)
Pro forma $(.18) $(.38)
Diluted earnings per share As reported $(.06) $(.05)
Pro forma $(.18) $(.38)
To make the computations of pro forma results under FAS 123, the
fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions: no dividend yield for all years and
expected lives of ten years. For fiscal 2000, the average
expected volatility is 48%, and the average assumed risk-free
interest rate is 6.23%. The options and warrants granted under
these plans are not registered and, accordingly, there is no
quoted market price.
A summary of the status of the Company's stock option and
warrants plans as of February 29, 2000 and February 28, 1999 and
changes during the years ending on those dates is presented
below:
Options Warrants
Exercise Exercise
Shares Price Shares Price
Outstanding March 1, 1998 721,500 $ 2.782 170,000 $ 2.588
Granted 261,510 $14.774 73,000 $14.339
Exercised (31,200) $ 2.245
Forfeited (800) $ 2.125
Outstanding February 28, 1999 951,010 $ 6.098 243,000 $ 6.118
Exercisable February 28, 1999 621,805 $ 5.361 243,000 $ 6.118
Outstanding March 1, 1999 951,010 $ 6.098 243,000 $ 6.118
Granted 244,500 $ 3.791 152,000 $ 3.463
Exercised (6,400) $ 2.125
Expired unexercised (7,800) $14.015
Forfeited (7,300) $10.595 (3,000) $ 4.750
Outstanding February 29, 2000 1,174,010 $ 5.559 392,000 $ 5.099
Exercisable February 29, 2000 829,756 $ 5.126 392,000 $ 5.099
Weighted-average fair value
of options and warrants
granted during the year,
computed in accordance
with FAS 123 $ 2.598 $ 2.373
The following table summarizes information about fixed stock
options and warrants outstanding at February 29, 2000:
Options Warrants
Range of exercise prices $14.750 - $16.875 $14.750
Number outstanding 258,510 70,000
Weighted-average remaining
contractual life in years 8.197 8.197
Weighted-average exercise price $14.758 $14.750
Number exercisable 155,706 70,000
Range of exercise prices $4.375 - $4.500 $4.440 - $4.500
Number outstanding 167,500 82,000
Weighted-average remaining
contractual life in years 9.204 9.200
Weighted-average exercise price $4.499 $4.499
Number exercisable 83,750 82,000
Range of exercise prices $2.125 - $2.875 $2.125 - $2.875
Number outstanding 748,000 240,000
Weighted-average remaining
contractual life in years 6.410 7.256
Weighted-average exercise price $2.617 $2.490
Number exercisable 590,300 240,000
(10) REGULATORY REQUIREMENTS
BSFS is subject to the uniform net capital rule of the Securities
and Exchange Commission (Rule 15c3-1), which requires that the
ratio of "aggregate indebtedness" to "net capital" not exceed 15
to 1 (as those terms are defined by the Rule). BSFS had net
capital of $1,606,212 as of February 29, 2000, which was in
excess of its required minimum net capital of $127,500. The
ratio of aggregate indebtedness to net capital was 0.16 to 1 as
of February 29, 2000. BSFS is also subject to regulations of the
District of Columbia and thirty-two states in which it is
registered as a licensed broker-dealer.
Buckeye Bancstocks is required by the Ohio Division of Securities
to maintain an "allowable net worth" of $25,000. The Company has
guaranteed this allowable net worth. HAG and BSFS are Registered
Investment Advisers and subject to regulation by the SEC pursuant
to the Investment Advisors Act of 1940.
(11) CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK
The Company's NASD broker-dealer subsidiary, under the
correspondent agreement with its clearing broker, has agreed to
indemnify the clearing broker from damages or losses resulting
from customer transactions. The Company is, therefore, exposed
to off-balance sheet risk of loss in the event that customers are
unable to fulfill contractual obligations. The Company manages
this risk by requiring customers to have sufficient cash in their
account before a buy order is executed and to have the subject
securities in their account before a sell order is executed. The
Company has not incurred any losses from customers unable to
fulfill contractual obligations.
In the normal course of business, the Company periodically sells
securities not yet purchased (short sales) for its own account
and writes options. The establishment of short positions and
option contracts expose the Company to off-balance sheet market
risks in the event prices change, as the Company may be obligated
to cover such positions at a loss. At February 29, 2000, the
Company had no short security positions, the Company had not
written any option contracts and did not own any options. The
Company did not experience any credit losses due to the failure
of any counterparties to perform during the year ended February
29, 2000. Senior management of the Company is responsible for
reviewing trading positions, exposures, profits and losses,
trading and hedging strategies on a daily basis.
The Company's significant industry concentrations, which arise
within its normal course of business activities, is with
financial institutions for bank securities transactions.
(12) SEGMENT INFORMATION
Description of the types of services from which each reportable
segment derives its revenues
The Banc Stock Group, Inc., has five reportable segments:
Research, Mutual Fund Advisor, Brokerage, Investment Banking and
Trading Portfolio. Research provides bank valuation services and
financial research of small-capitalization community bank stocks.
The Mutual Fund Advisor is the investment advisor to The Banc
Stock Group Fund, a diversified, open-end mutual fund. Brokerage
provides private portfolio management and brokerage services to
individual and institutional investors. Trading Portfolio is a
segment designed to isolate the market volatility of security
positions from the performance of other business segments to aid
the operating decision makers in deciding how to allocate
resources and in assessing performance. Revenue is generated in
the Trading Portfolio from trading profits and losses on the
Company's portfolios.
Measurement of segment profit or loss and segment assets
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The
Banc Stock Group, Inc., evaluates performance based on profit or
loss from operations before income taxes. The Company focuses
its attention on providing services to external customers.
Operating segments provide services and support to each other but
there is no formal transfer pricing structure for inter-segment
services.
Factors management used to identify the enterprises's reportable
segments
The Company's reportable segments are strategic business units
that offer different services to different target customers.
They are managed separately because each business requires
different marketing strategies.
Financial information for the year ended February 29, 2000
Financial information for each reportable segment is shown
below. The Company does not operate, or hold assets, in any
foreign country. The Company does not have any single customer
generating 10% or more of revenue.
Mutual
Fund Investment Trading
Research Advisor Brokerage Banking Portfolio Combined
Revenue from
external customers:
Trading Profits
(Losses) $65,477 ($293,449)($227,972)
Fees &
Commissions $26,289 $257,592 2,222,335 2,506,216
Investment
banking 10,000 363,969 $275,462 649,431
Dividends 24,271 262,148 286,419
Intersegment
revenues -
Interest revenue 22,596 29,920 52,516
Interest expense 8,351 1,755 10,106
Depreciation and
amortization 15,694 15,694 50,218 16,053 97,659
Segment income
(loss) before taxes(336,499)(427,405) 509,143 (453,858) (40,912) (749,531)
Equity in net
earnings of
affiliated company (176,040) (176,040)
Segment assets 54,013 72,637 2,275,045 116,935 10,517,844 13,036,474
Expenditures for
segment assets 14,289 14,289 14,289 14,290 57,157
Financial information for the year ended February 28, 1999
Revenue from
external customers:
Trading Profits
(Losses) ($97,375) ($727,335)($824,710)
Fees &
Commissions $30,051 $444,637 2,937,202 3,441,890
Investment
banking 70,847 $900,311 971,158
Dividends 13,006 180,333 193,339
Intersegment
revenues -
Interest revenue 42,482 8,194 50,676
Interest expense 22,870 34,265 57,135
Depreciation and
amortization 14,540 34,884 43,619 93,043
Segment income
(loss)before taxes(315,938) 104,825 778,018 135,959 (1,129,954) (427,090)
Equity in net
earnings of
affiliated company (52,070) (52,070)
Segment assets 55,417 95,273 2,240,322 118,370 11,928,390 14,437,772
Expenditures for
segment assets 20,000 20,000 21,336 20,000 81,336
ITEM 8: Changes In and Disagreements With Accountants or
Accounting and Financial Disclosures
None
PART III
ITEM 9: Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act
As of February 29, 2000, the members of the Company's Board of
Directors, and the Company's executive officers, each of whom
serves at the direction of the Board, were as follows:
Term
Name Age Expires Position
Michael E. Guirlinger 52 2000 Director, President, CEO & Treasurer
Jeffrey C. Barton 53 Vice President & Chief Financial Officer
Mark A. Davis 48 Vice President & Director of Research
Sandra L. Quinn 34 2002 Director, Vice President & Corp. Secretary
Harry J. Ryan 55 Vice President & Director of Marketing
Edward E. Schmidt 53 Executive Vice President
Larry A. Beres 53 2000 Director
Roger D. Blackwell 59 2002 Director
Robert K. Butner 78 2001 Director
Richard Desich 60 2000 Director
James G. Mathias 47 2000 Director
John Rettig 59 2001 Director
Harvey J. Thatcher 66 2002 Director
L. Jean Thiergartner 67 2001 Director
Michael E. Guirlinger was elected President, Chief Executive
Officer and Treasurer by the Board of Directors effective May 18,
1995. Mr. Guirlinger is a member of the Board of Directors for
the Company and BSA.
Mr. Guirlinger had been Vice President and Chief Operating
Officer of the Company since December, 1992 and a Director since
June, 1993. Since 1995, Mr. Guirlinger has also been President
and CEO of ShareholderOnline and was Vice President from 1992 to
1995. He is also President and Treasurer of Buckeye Bancstocks
and HAG and Vice President and Treasurer of BSFS. From 1991 to
December 1992, Mr. Guirlinger was a Director of Development for
Foxgate Farms, Inc., a residential home builder. During that
same period, Mr. Guirlinger was also Vice President of Northwest
Passage Trading Co., a national and international trading
company. In 1990, Mr. Guirlinger, along with two other
individuals, founded Spectrum Mortgage Co., a real estate
mortgage broker, with which he was involved until 1991. From
1986 to 1990, Mr. Guirlinger was Director of Development and
Finance for Investment Resources, Inc., an intrastate broker-dealer.
Mr. Guirlinger received a B.A. Degree from Aquinas
College in 1970 and an M.B.A. Degree from the Ohio State
University in 1986. Mr. Guirlinger I licensed as a General
Securities Representative (Series 7), General Securities
Principal ( Series 24), and a Uniform Securities Agent (Series
63).
Jeffrey C. Barton has been Chief Financial Officer of the
Company since October, 1992. He is also Vice President & CFO of
the Company's subsidiaries and of ShareholderOnline. Effective
January 1999 Mr. Barton was designated Principal of Buckeye
Bancstocks, Inc. From 1990 through 1998, Mr. Barton was also CFO
of Saunders Pearson Company, a contract financial management
company. Mr. Barton received a B.B.A. Degree from Ohio
University in 1969 and an M.B.A. Degree from Ohio University in
1972. Mr. Barton is a Certified Public Accountant and is
licensed as a Financial Operations Principal (Series 27) and a
Uniform Securities Agent (Series 63).
Mark A. Davis is Vice President and Director of Research for
the Company and its subsidiaries. He is also Vice President of
ShareholderOnline. He is a former Vice President of The Phoenix
Scioto Company, FS Management Company and Buckeye Bancstocks,
Inc. Mr. Davis is currently a registered principal for BSFS. He
attended Yale College, New Haven, Connecticut. Mr. Davis is
licensed as a Registered Options Principal (Series 4), Uniform
Securities Agent (Series 63), Municipal Securities Principal
(Series 53), General Securities Principal (Series 24), and
General Securities Representative (Series 7).
Sandra L. Quinn is a Director of the Company and Vice
President & Corporate Secretary. She is also Vice President &
Corporate Secretary of the Company's subsidiaries and of
ShareholderOnline. She has been a Director of the Company and of
ShareholderOnline since 1993. From October 1995 through 1998,
Ms. Quinn served as Principal of Buckeye Bancstocks, Inc. Ms.
Quinn is a member of the American Society of Corporate
Secretaries. Ms. Quinn graduated valedictorian from Bradford
Business School. She began her employment with the Company in
May, 1991, and is licensed as a Uniform Securities Agent (Series
63), Corporate Securities Representative (Series 62), Uniform
Investment Adviser Representative (Series 65), and as an
Investment Company/Variable Contracts Limited Representative
(Series 6).
Harry J. Ryan is Vice President & Director of Marketing of
the Company and of ShareholderOnline. He joined the Company in
January 1997. Prior to his employment by the Company, he was the
Vice President of Marketing for LifeLine Shelter Systems, an Ohio
based manufacturer of mobile medical and dental clinics with
clients worldwide. Prior to his career in private sector
marketing, Mr. Ryan served for fourteen years as the Director of
several departments, for the Ohio Attorney General. Prominent
among these was his position as Director of Program Development,
the public relations and educational arm of the office, and chief
administrator of the Ohio Medical Fraud Department. He also
provided political direction to the Attorney General as his
Deputy Campaign Director. Prior to this, he served with the U.S.
Army and U.S. State Department in the American Embassy in
Teheran, Iran. Mr. Ryan holds a Bachelor of Arts degree from
Ohio Dominican College and a Master's of Business degree from
Central Michigan University. He is licensed as a Uniform
/Securities Agent (Series 63), and a General Securities
Representative (Series 7).
Edward E. Schmidt is Executive Vice President of the Company
and of ShareholderOnline. Mr. Schmidt joined the Company in May
1997. Previously, he served as President, CEO and Director of
Capital West Group, Inc., subsidiary of Capital Corp of the West,
holding the additional position of Senior Vice President. Prior
to that he served as Director of The Finley Group, Inc. Mr.
Schmidt is a Certified VIA consultant, holds a BS Business
Administration degree and is a graduate of the Pacific Coast
Banking School, University of Washington, Seattle, Washington.
Mr. Schmidt is licensed as a Corporate Securities Representative
(Series 62), and as a Uniform Securities Agent (Series 63).
Larry A. Beres became a Director of the Company in 1995.
Mr. Beres is Executive Vice President of Tooling Technology Group
of Dayton, Ohio. The firm is a supplier of tooling to the
plastics industry. He was formerly President of Formex, Inc., of
Dayton, Ohio, a supplier of systems to the plastics Industry.
Mr. Beres graduated from Kent State University with a Bachelor of
Science Degree in Chemistry and attended the K.S.U MBA Program.
Roger D. Blackwell was elected to serve on the Company's
Board in February 1999. Dr. Blackwell is a Professor of
Marketing at The Fisher College of Business at The Ohio State
University. He is also president of Blackwell Associates, Inc.,
a consulting firm in Columbus, Ohio, through which he works with
many of America's most successful companies.
Roger Blackwell was named "Outstanding Marketing Educator in
America" by Sales and Marketing Executives International and
"Marketer of the Year" by the American Marketing Association. He
also received the "Alumni Distinguished Teaching Award", the
highest award given by The Ohio State University. He was cited
by The New York Times in 1995 as one of the top speakers on the
lecture circuit, and is regularly quoted in publications; such
as, Business Week, USA Today, Forbes, and The Wall Street
Journal, and has appeared on numerous television programs
including CBS This Morning.
Dr. Blackwell received his B.S. and M.S. degrees from The
University of Missouri and his Ph.D. from Northwestern
University. He also received an honorary doctorate degree from
The Cincinnati College of Mortuary Science. He serves on
numerous boards of both privately and publicly held corporations
including Airnet Systems, Applied Industrial Technologies
(formerly Bearings, Inc.), Checkpoint Systems, Flex-Funds, Max &
Erma's Restaurants, Worthington Foods, and Intimate Brands.
Robert K. Butner became a Director of the Company in 1993.
Mr. Butner is also a Director of ShareholderOnline. Mr. Butner
is retired from the faculty of Ohio University where he was a
Professor of Mathematics for 39 years and Chairman of the
Mathematics Department. Upon retirement, Mr. Butner was
confirmed Emeritus Professor of Mathematics. Mr. Butner received
a B.S. Degree in 1943 with Phi Beta Kappa honors and an M.S.
Degree in 1949 and a Ph.D. Degree in 1952 from the State
University of Iowa. From 1943 to 1946, Dr. Butner served as an
officer in the United States Navy. Since retirement, Dr. Butner
has continued his long-term involvement with the Independent
Study Program at Ohio University, writing a number of Study
Guides for correspondence courses in Mathematics.
Richard Desich became a Director of the Company in December
1999. Mr. Desich is the owner and President of Mid-Ohio
Securities since 1974, specializing in investment management and
trustee / custodial services for individual retirement accounts;
President of Equity Oil and Gas Funds Incorporated, specializing
in producing oil and gas; and General Principal for Maddie
Consulting and has lectured throughout the United States at
various seminars and conferences. Mr. Desich is a Director of
the Lorain County Community College and of Accel International
Corporation, a property and casualty insurance company. He
graduated from Ohio State University with a B.S. degree in
Finance.
Dr. James G. Mathias became a Director of the Company in
1993. Dr. Mathias is also a Director of ShareholderOnline.
Since 1988, Dr. Mathias has been a veterinarian practicing in
Tipp City, Ohio, where he is the owner of the Tipp City Animal
Hospital and Wellness Center. Dr. Mathias attended the
University of Texas and completed his education at the Ohio State
University, graduating from the College of Veterinary Medicine in
1978. He was a member of the Honor Society of Phi Zeta, a
Veterinary Honor Society. Dr. Mathias is also founder and
president of the Dayton North Women's Center and is a speaker on
Ratite Medicine. He is currently on the Veterinary Advisory
Board of the Iams Company.
John Rettig was elected to the Board of Directors of Company
in August 1998. He has been owner and operator of The Quality
Cleaners since 1970. The volume Dry-cleaning Company does
residential, commercial and fires restoration cleaning. Mr.
Rettig has achieved the recognized Certified Environmental Dry
cleaner status. Mr. Rettig attended Bowling Green State
University from 1960 through 1961 studying Business
Administration. In 1961, Mr. Rettig volunteered for the US Army
draft and served in the Adjutant General Corps. until 1963.
During his tenure in the service, Mr. Rettig served as team chief
in a Chemical, Biological and Radiological Warfare Team. During
his service, he continued his education with a US Army
Correspondence School Business Course. From 1988 until 1998, Mr.
Rettig served as Chairman of Sandusky county Republican Party.
Mr. Rettig has also served on many boards and county service
organizations.
Harvey J. Thatcher became a Director of the Company in 1991.
He was formerly President of Thatcher Insurance Agency, Inc.
Since retirement from Thatcher Insurance, Inc., he is engaged in
the refinancing of homes as a Mortgage Broker. He also serves as
Director of the following organizations: ShareholderOnline (since
1991), Thatcher Lands, Inc., (since 1976), German Mutual
Insurance Company (since 1987), Tri-State Venture Group (since
1994), and Tendasoft, Inc. (Since 1998).
Jean Thiergartner became a Director of the Company in 1991,
as well as a Director of ShareholderOnline. Ms. Thiergartner is
also the Secretary-Treasurer of Thiergartner Farms, Inc., for
which she worked for more than 30 years. She is past Treasurer
of the Ohio Beef Council, past President of the Ohio Cattle
Womens' Association, has been a member and past President of the
Union County Health Board for over 14 years and is a past
delegate to the State Convention for the Ohio Farm Bureau. She
is a member of St. Paul Lutheran Church and active on many
committees, including the Parsonage Building Committee. She is
presently serving on the Advisory Board for Ohio Hi-Point and
Clark Tech Adult Education.
Based solely upon a review of Forms 3 and 4 furnished to the
Company under Rule 16a-3(d), there were no reports filed late
during the fiscal year ended February 29, 2000.
ITEM 10: Executive Compensation
Summary Compensation Table
Name of Principal Awards All
and Position Year Salary Bonus(B) Other* Options(A) Other
Michael E. Guirlinger,
President 1999 101,574 33,975
Mark A. Davis, VP 1999 90,000 21,388 37,500 sh
Jeffrey C. Barton, CFO 1999 100,000 11,144 12,500 sh
Michael E. Guirlinger,
President 1998 100,000 91,812 46,828 81,010 sh
Mark A. Davis, VP 1998 85,000 90,406 62,589 40,000 sh
Edward E. Schmidt, EVP 1998 75,000 20,870 4,905 6,000 sh
Michael E. Guirlinger,
President 1997 80,455 36,861 35,202 45,000 sh
Mark A. Davis, VP 1997 61,923 58,890 61,066 30,000 sh
Edward E. Schmidt, EVP 1997 62,019 3,140 15,000 sh 94,102(A)
* Commissions
(A) During the fiscal year ended February 29, 2000, options were
granted, with terms of ten years and exercise prices of $4.50 and
$2.25 to employees and independent contractors including Messrs.
Davis and Barton. Mr. Davis was awarded 15,000 stock options
which vested immediately and 15,000 stock options which vest over
five years with an exercise price of $4.50 and 3,750 stock
options which vested immediately and 3,750 stock options which
vest over five years with an exercise price of $2.25. Mr. Barton
was awarded 5,000 stock options which vested immediately and
5,000 stock options which vest over five years with an exercise
price of $4.50 and 1,250 stock options which vested immediately
and 1,250 stock options which vest over five years with an
exercise price of $2.25. During the fiscal year ended February
28, 1999, options were granted, with terms of ten years and
exercise prices of $14.75 to employees and independent
contractors including Messrs. Guirlinger, Davis and Schmidt. Mr.
Guirlinger was awarded 40,505 stock options which vested
immediately and 40,505 stock options which vest over five years.
Mr. Davis was awarded 20,000 stock options which vested
immediately and 20,000 stock options which vest over five years.
Mr. Schmidt was awarded 3,000 stock options which vested
immediately and 3,000 stock options which vest over five years.
During the fiscal year ended February 28, 1998, Mr. Guirlinger
was awarded 22,500 stock options which vested immediately and
22,500 stock options which vest over five years, at an exercise
price of $2.125. These stock options expire on March 7, 2007.
Mr. Davis was awarded 15,000 stock options which vested
immediately and 15,000 stock options which vest over five years,
at an exercise price of $2.125. Mr. Schmidt was awarded 7,500
stock options which vested immediately and 7,500 stock options
which vest over five years, at an exercise price of $2.375. Mr.
Schmidt exercised 7,500 of his options resulting in compensation
of the difference between the exercise price and fair market
value at date of exercise of $94,102. During the fiscal year
ended February 28, 1997, Mr. Guirlinger was awarded 25,000 stock
options effective February 29, 1996 which vested immediately.
These stock options expire February 28, 2006, with an exercise
price of $2.875. At February 29, 2000 Mr. Guirlinger has 198,506
stock options which are exercisable and 52,504 stock options
which vest over five years. Mr. Davis has 157,150 stock options
which are exercisable and 50,350 stock options which vest over
five years. Mr. Schmidt has 10,350 stock options which are
exercisable and 10,650 stock options which vest over five years.
Mr. Barton has 6,250 stock options and 20,000 warrants which are
exercisable and 6,250 stock options which vest over five years.
(B) Bonuses paid in each year are based on financial performance
for the previous year.
No other officer of the Company received in excess of $100,000
compensation.
Director Compensation
Each director who is not an employee of the Company is entitled
to receive a fee of $500 plus travel expenses for each directors' meeting
attended.
ITEM 11: Security Ownership of Certain Beneficial Owners
and Management
The following sets forth, as of March 31, 2000, certain
information concerning stock ownership of all persons
known by the Company to own beneficially five
percent or more of the outstanding shares of any class of the
Company's Common Stock, each director and all officers and
directors of the Company as a group, and the percentage of voting
power (assuming exercise of all options which are
currently exercisable):
Class A Options/ Class A Class C
Shares(A) Warrants Total Class Shares Class Combined
Number Number Number A % Number C % %
Jeffrey C. Barton
290 E. Kossuth Street
Columbus, Ohio 43206 6,000 27,250 33,250 * *
Larry A. Beres
7811 Winding Way South
Tipp City, Ohio 45371 42,500 40,000 82,500 * *
Roger D. Blackwell
3380 Tremont Road
Columbus, Ohio 43221 13,500 10,000 23,500 * *
Robert K. Butner
12 McGuffey Lane
Athens, Ohio 45701 369,779 65,000 434,779 4.5% 4.5%
James T. Coppage
6001 River Road,
Suite 402 Columbus,
Georgia 31904 89,140 89,140 * 10,860 9.1% 1.0%
Mark A. Davis
6215 Northgate Rd. Apt. D
Columbus, Ohio 43229 31,778 167,150 198,928 2.1% 2.0%
Richard Desich
36 Lake Avenue
Elyria, Ohio 44036 7,450 7,450 * *
First Eldorado
Bancshares
946 Fourth Street
Eldorado, IL 62930 361,017 361,017 3.8% 43,983 36.7% 4.2%
Michael E. Guirlinger
5321 C Drumcally Lane
Dublin, Ohio 43017 22,427 211,107 233,534 2.4% 2.4%
James G. Mathias
7707 Winding Way South
Tipp City,
Ohio 45371 96,568 65,000 161,568 1.7% 2,170 1.8% 1.7%
Sandra L. Quinn
6288 Chelmsford Sq. E.
Columbus, Ohio 43229 10,500 43,000 53,500 * *
John Rettig
826 Third Avenue
Fremont, Ohio 43420 35,290 20,000 55,290 * *
Harry J. Ryan
3888 James River Road
New Albany,
Ohio 43054 15,000 12,750 27,750 * *
Edward E. Schmidt
5544 Turnberry Drive
Westerville,
Ohio 43082 12,950 12,950 * *
Harvey J. Thatcher
135 East Central
Van Wert,
Ohio 45891 57,692 65,000 122,692 1.3% 1.3%
L. Jean Thiergartner
20896 Orchard Road
P.O. Box 387
Milford Center,
OH 43045 241,500 65,000 306,500 3.2% 3.1%
John W. Walden
1132 Broadway
Columbus,
Georgia 31901 178,280 178,280 1.9% 21,720 18.1% 2.1%
Carol A. Wright
755 Wagon Wheel Drive
Northport,
MI 49670 90,442 90,442 * 11,411 9.5% 1.0%
Directors and Officers
as a Group
(12 persons) 949,984 804,207 1,754,191 18.2% 2,170 1.8% 18.0%
*less than 1% of Class
(A) Unless otherwise indicated, the sole voting and investment
power is held by the persons named. Mr. Butner disclaims
beneficial ownership of 130,000 Class A shares held in trust for
Phyllis F. Butner.
ITEM 12: Certain Relationships and Related Transactions - None
ITEM 13: Exhibits and Reports on Form 8-K
(a) Index of Exhibits
Exhibit
*2.01 Plan and Agreement of Reorganization between the
Company and First Scioto Company.
*2.02 Agreement dated November 4, 1992 for purchase of First
Scioto Financial Services Stock by HAG.
*2.03 Agreement and Plan of Reorganization, dated January 7,
1993 between the Company and HAG.
*3.01 Amended and Restated Articles of Incorporation of
Heartland Financial Group, Inc.
*3.02 Bylaws of the Heartland Financial Group, Inc.
*4.01 Specimen Class A Common Stock Certificate.
*10.01 Property Lease between the First Scioto Company and The
Continent JV326128.
*10.03 The Heartland Incentive Compensation Plan.
*10.04 1993 Non-Qualified and Incentive Stock Option Plan.
*22.01 List of Subsidiaries
(b) Reports on Form 8-K: None
* Indicates Exhibits previously filed with the Securities and
Exchange Commission and incorporated herein by reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:
THE BANC STOCK GROUP, INC.
/S/Anthony J. Reilly
By Anthony J. Reilly (appointed President & CEO on April 27, 2000)
May 3, 2000.
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
/S/Anthony J. Reilly President & CEO May 3, 2000
Anthony J. Reilly
/S/Sandra L. Quinn Secretary and Director May 3, 2000
Sandra L. Quinn
/S/Jeffrey C. Barton Chief Financial Officer May 3, 2000
Jeffrey C. Barton (chief financial and chief
accounting officer)
/S/Larry A. Beres Director May 3, 2000
Larry A. Beres
/S/Roger D. Blackwell Director May 3, 2000
Roger D. Blackwell
/S/Robert K. Butner Director May 3, 2000
Robert K. Butner
/S/Richard Desich Director May 3, 2000
Richard Desich
Director
James G. Mathias
/S/John Rettig Director May 3, 2000
John Rettig
/S/Harvey Thatcher Director May 3, 2000
Harvey Thatcher
/S/Jean Thiergartner Director May 3, 2000
L. Jean Thiergartner
Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND> 0
<RESTATED>
<CIK>
<NAME> 0
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<PERIOD-START> MAR-01-1999
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> FEB-29-2000
<EXCHANGE-RATE> 1
<CASH> 2,901,271
<RECEIVABLES> 1,357,094
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 7,676,203
<PP&E> 200,052
<TOTAL-ASSETS> 13,036,474
<SHORT-TERM> 0
<PAYABLES> 79,734
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 8,909,322
<OTHER-SE> 3,157,188
[TOTAL-LIABILITIES-AND-EQUITY] 13,036,474
<TRADING-REVENUE> (227,972)
<INTEREST-DIVIDENDS> 338,935
<COMMISSIONS> 649,469
<INVESTMENT-BANKING-REVENUES> 649,431
<FEE-REVENUE> 1,856,747
<INTEREST-EXPENSE> 10,106
<COMPENSATION> 1,075,286
<INCOME-PRETAX> (749,531)
<INCOME-PRE-EXTRAORDINARY> (749,531)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (545,571)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
