U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
Commission file number 000-24498
THE BANC STOCK GROUP, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0190407
(State of incorporation) (IRS Employer Identification No.)
1105 SCHROCK ROAD, COLUMBUS, OHIO 43229
(Address of principal executive offices)
(614) 848-5100
(Issuer's telephone number)
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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of December 31, 2000:
CLASS NUMBER OF SHARES
Class A shares, No Par Value 8,704,512
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)
Yes No X
THE BANC STOCK GROUP, INC. AND SUBSIDIARIES
INDEX
PAGE
Part I Financial Information:
Item 1. Consolidated Financial Statements 3-7
Notes to Consolidated Financial Statements 8-21
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 22-28
Part II Other Information:
Item 6 29
Signatures 29
THE BANC STOCK GROUP, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying consolidated financial statements of The Banc
Stock Group, Inc. (the "Company") are unaudited but, in the
opinion of management, reflect all adjustments (which include only
normal recurring accruals) necessary to present fairly such
information for the periods and at the dates indicated and to make
the consolidated financial statements not misleading. The results
of operations for the nine months ended November 30, 2000 may not
be indicative of the results of operations for the ten month
transition period ending December 31, 2000. Since the accompanying
consolidated financial statements have been prepared in accordance
with Item 310 of Regulation S-B, they do not contain all
information and footnotes normally contained in annual consolidated
financial statements; accordingly, they should be read in
conjunction with the consolidated financial statements and notes
thereto appearing in the Company's Annual Report.
THE BANC STOCK GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF NOVEMBER 30, 2000
(UNAUDITED)
ASSETS
Cash $ 4,515,907
Trading portfolio:
Marketable equity securities, at market value 4,574,441
Not readily marketable equity securities,
at estimated fair value 296,588
Mortgage participation notes, at market value 249,600
Accounts receivable:
Affiliates 99,565
Pending settlements and other 105,979
Refundable income taxes 539,000
Investment in ShareholderOnline, Inc. 48,000
Property and equipment, net of accumulated depreciation of $262,765 147,423
Deposits and other 149,743
Total assets $ 10,726,246
LIABILITIES
Accounts payable to broker-dealers and other $ 167,976
Secuities sold not yet purchased 511,000
Accrued expenses 430,473
Total liabilities 1,109,449
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 8,617,612 shares outstanding 9,562,747
Class C, no par value, 120,000 shares
authorized, issued and outstanding -
Treasury stock, at cost
(22,250 Class A shares) (28,300)
Deferred compensation (77,225)
Retained earnings 159,575
Total shareholders' equity 9,616,797
Total liabilities and shareholders' equity $ 10,726,246
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 NINE MONTHS ENDED NOVEMBER 30, 2000 and 1999
(UNAUDITED)
9 Months Ended 3 Months Ended
NOV. 2000 NOV. 1999 NOV. 2000 NOV. 1999
REVENUES AND TRADING
GAINS and LOSSES:
Trading profits (losses) $(1,668,742) $406,347 $(730,411) $(341,716)
Management fees and
commissions 905,484 1,983,572 183,362 538,130
Investment banking 32,982 649,736 - 337,609
Dividends 262,203 195,614 96,811 77,947
Interest & other 37,548 34,042 9,168 12,879
Total revenues and trading
gains and losses (430,525) 3,269,311 (441,070) 624,849
EXPENSES:
Brokers' commission 488,978 941,371 108,351 345,473
Salaries, benefits and
payroll taxes 1,067,679 796,564 374,176 281,411
Professional fees 327,600 307,187 103,534 73,931
Interest 5,848 2,031 1,951 510
Write off of goodwill of
liquidated subsidiary 309,745 - - -
Write down of investment in 242,200 - 242,200 -
ShareholderOnline, Inc.
General and administrative 696,858 992,189 198,016 379,617
Total expenses 3,138,908 3,039,342 1,028,228 1,080,942
INCOME (LOSS) BEFORE TAXES (3,569,433) 229,969 (1,469,298) (456,093)
INCOME TAX PROVISION (CREDIT) (632,500) 41,000 - (169,000)
INCOME (LOSS) BEFORE EQUITY IN
NET EARNINGS OF AFFILIATED
COMPANY (2,936,933) 188,969 (1,469,298) (287,093)
Equity in net losses of (60,680) (63,450) - (50,440)
ShareholderOnline, Inc.
NET INCOME (LOSS) $(2,997,613) $125,519 $(1,469,298) $(337,533)
BASIC EARNINGS (LOSS) PER SHARE $(0.35) $0.01 $(0.17) $(0.04)
DILUTED EARNINGS (LOSS) PER SHARE $(0.35) $0.01 $(0.17) $(0.04)
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 NINE MONTHS ENDED NOVEMBER 30, 2000
(UNAUDITED)
Treasury Deferred Retained
Class A Class C Stock Compensation Earnings Total
Balance 2/29/00 $9,317,203 - ($385,403) ($22,778) $3,157,188 $12,066,210
Stock options and
warrants compensation
expense 68,500 - - - - 68,500
Deferred compensation
related to stock options
and warrants 81,500 - - (81,500) - -
Amortization of deferred
compensation - - - 27,053 - 27,053
Purchase of
treasury stock (103,853) (103,853)
Sale of treasury
stock 95,544 460,956 556,500
Net loss - - - - (2,997,613) (2,997,613)
Balance 11/30/00 $9,562,747 - ($28,300) ($77,225) $159,575 $9,616,797
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 NINE MONTHS ENDED NOVEMBER 30, 2000 and 1999
(UNAUDITED)
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,997,613) $125,519
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 55,312 73,668
Write off of goodwill of liquidated subsidiary 309,745 -
Stock options and warrants compensation expense 68,500 67,627
Amortization of deferred compensation 27,053 -
Deferred taxes (150,500) (499,000)
Equity in undistributed losses of
ShareholderOnline 60,680 63,450
Write down of investment in ShareholderOnline 242,200 -
Unrealized loss 986,770 1,696,135
(Increase) decrease in certain assets-
Trading profits, net 1,568,804 2,449,953
Mortgage participation notes - (72,600)
Accounts receivable clients 62,922 (13,067)
Other accounts receivable 913,103 95,981
Refundable income taxes (282,000) -
Other assets 82,250 40,454
Increase (decrease) in certain liabilities-
Securities sold not yet purchased 511,000 55,214
Unearned commissions (94,800) (164,300)
Accounts payable to broker-dealers & other 88,242 15,059
Accrued expenses and other (214,757) (211,461)
Net cash provided by operating activities 1,236,911 3,722,632
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16,082) (57,156)
Disposal of property 22,635 -
Net cash provided by (used in) investing activities 6,553 (57,156)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options - 13,600
Purchase of treasury stock (103,853) -
Sale of treasury stock 556,500 -
Advances from affiliates 4,694 12,405
Advances to affiliates (86,169) (66,655)
Net cash provided by (used in) financing activities 371,172 (40,650)
NET INCREASE IN CASH 1,614,636 3,624,826
CASH, BEGINNING OF PERIOD 2,901,271 332,332
CASH, END OF PERIOD $4,515,907 $3,957,158
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $5,848 $2,031
Income taxes - 530,000
The accompanying notes are an integral part of these consolidated financial
statements.
THE BANC STOCK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 two subsidiary
operating companies.
Diamond Hill Capital Management, Inc., (DHCM), formerly Heartland
Advisory Group, Inc., is a wholly-owned subsidiary of the Company
and a registered investment adviser. DHCM is the Investment
Adviser to the Diamond Hill Focus Fund, an open-end mutual
fund,(symbol DIAMX) and offers advisory accounts to institutional
and individual investors. DHCM was also the Investment Adviser to
The Banc Stock Group Fund, an open-end mutual fund, through
November 30, 2000.
Banc Stock Financial Services, Inc. (BSFS), an Ohio corporation, is
a wholly-owned subsidiary of DHCM and 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 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 and offers advisory accounts
to institutional and individual investors. Effective November 30,
2000, BSFS became the Investment Adviser to The Banc Stock Group
Fund (symbol BANCX).
Buckeye Bancstocks, Inc., was an Ohio corporation established in
1977, to act as an intrastate broker-dealer trading primarily in
Ohio bank stocks until May 31, 2000, when it was liquidated.
(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, DHCM 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 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 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 Nine Months Ended November 30, 2000
Net Income Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings ($2,997,613) 8,496,726 ($ .35)
Diluted Earnings ($2,997,613) 8,496,726 ($ .35)
For the Quarter Ended November 30, 2000
Net Income Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings ($1,469,298) 8,599,150 ($ .17)
Diluted Earnings ($1,469,298) 8,599,150 ($ .17)
For the Nine Months Ended November 30, 1999
Net Income Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings $125,519 8,454,767 $ .01
Effect of Dilutive Securities:
Assumed exercise of:
Stock Options 237,180 (.00)
Warrants 63,004 (.00)
Diluted Earnings $125,519 8,754,951 $ .01
For the Quarter Ended November 30, 1999
Net Income Shares Per-Share
(Numerator) (Denominator) Amount
Basic Earnings ($337,533) 8,456,817 ($ .04)
Diluted Earnings ($337,533) 8,456,817 ($ .04)
Equity Investment in ShareholderOnline, Inc.
ShareholderOnline, Inc., an Ohio corporation establishing an
electronic stock information service and alternative trading
system, was under common management with the Company through April
27, 2000. Because of the common management, the Company's 16%
ownership investment in ShareholderOnline, Inc., was accounted for
on the equity method of accounting through the end of April 2000.
During 1999, ShareholderOnline, Inc., formalized its plans to raise
additional capital to launch its operations. Also, the Boards of
Directors of the Company and ShareholderOnline, Inc., recognized
that separate management was required to effectively execute
ShareholderOnline Inc.'s business plan, and on April 27, 2000, the
President and CEO of ShareholderOnline, Inc., resigned his
positions with the Company to devote his full attention to
ShareholderOnline, Inc. During 2000, ShareholderOnline, Inc.,
began pursuing separate investment and financing alternatives. The
use of the equity method of accounting for the investment in
ShareholderOnline, Inc., was discontinued as of May 1, 2000. The
Company recognized equity in the net losses of ShareholderOnline,
Inc., of $60,680 for the nine months ended November 30, 2000,
compared to losses of $63,450 for the nine months ended November
30, 1999.
The President and CEO of ShareholderOnline, Inc., subsequently
resigned his positions with ShareholderOnline, Inc., effective
October 19, 2000. Because of ShareholderOnline's unsuccessful
attempts to raise additional capital through November 30, 2000, the
Company has written down its investment in ShareholderOnline, Inc.,
to the Company's proportionate share of net book value. This
resulted in a write down of $242,200.
Fair Value of Financial Instruments
Substantially all of the Company's financial instruments are
carried at fair value or amounts approximating fair value. Assets,
including accounts receivable, mortgage participation notes, notes
and interest receivable and securities owned are carried at amounts
which approximate fair value. Similarly, liabilities, including
margin accounts payable to broker-dealers, 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
On July 17, 2000, the Company announced a program to repurchase up
to 2,000,000 shares of its common stock through open market
purchases and privately negotiated transactions, if any. During
the quarter ended August 31, 2000, the Company purchased 69,205
shares for $103,853. No repurchases were made during the quarter
ended November 30, 2000. In October 2000, in conjunction with an
appointment to the Board of Directors, the Company sold 350,000
shares of Class A treasury stock to a limited liability company
controlled by the newly appointed Director of the Company at the
market price of the shares ($1.59 per share) at the time of the
appointment.
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 November 30, 2000 consist of bank
stocks at market value, as follows:
Traded on national securities markets $2,869,986
Not traded on national securities
markets, but with readily ascertainable
market value 1,704,455
Total marketable equity securities $ 4,574,441
As of November 30, 2000, the Company had an investment in the
Diamond Hill Focus Fund representing 31% of its marketable equity
securities and securities of a particular community bank
representing 11%.
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 November 30, 2000 were
$296,588 at fair value with a cost of $341,600.
(5) MARGIN ACCOUNTS PAYABLE TO BROKER-DEALERS
The Company had no margin accounts payable to broker-dealers as of
November 30, 2000. Margin accounts bear interest at variable rates
which approximate the Broker Call Rate. Margin accounts are
secured by the securities held by the respective broker-dealers.
(6) RELATED PARTY TRANSACTIONS
Operating Expenses
The Company and ShareholderOnline, Inc., were under common
management through April 27, 2000. Certain expenses are paid by
the Company and allocated to ShareholderOnline, Inc., based upon
predetermined percentages as approved by the officers of the
Company and ShareholderOnline, Inc. Operating expenses in the
allocation were primarily salaries and benefits. Total expenses
allocated to ShareholderOnline, Inc., were $77,847 and $124,780
for the nine months ended November 30, 2000 and 1999, respectively.
(7) INCOME TAXES
The Company files a consolidated Federal income tax return. It is
the policy of the Company 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 nine months ended November
30, 2000 and 1999 are composed of the following:
2000 1999
Current income taxes $ (482,000) $ 540,000
Deferred income taxes (150,500) (499,000)
Provision for income taxes $ (632,500) $ 41,000
Deferred tax assets and liabilities consist of the following at
November 30, 2000 and 1999:
2000 1999
Deferred tax benefit of NOL carryforward $ 231,000 $ 1,500
Deferred tax benefit of stock options and
Warrants compensation 63,000 -
Deferred tax benefit of investment write down 82,000 -
Deferred tax benefit (liabilities) on unrealized
gains on securities owned 190,000 (568,500)
Valuation allowance (566,000) -
Deferred taxes $ - $ (567,000)
(8) OPERATING LEASES
The Company leases office space and a vehicle under operating
leases. Total lease expenses were approximately $123,000 in the
fiscal year ended February 29, 2000. 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 Banc Stock Group 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 nine months ended November 30, 2000 or 1999.
Stock Option Plan and Stock Warrants
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 May 11, 2000, one million warrants to purchase Class A
shares were granted to the newly recruited President & CEO of the
Company with exercise prices of $1.60 which vest, 20% immediately
and 20% each year over four years, and ten thousand warrants were
granted to a Director with exercise prices of $1.75 which vest
immediately. All of these warrants have ten year terms.
Effective August 10, 2000, 100,000 stock options were issued to the
President of BSFS with exercise prices of $1.60 which vest, 20%
immediately and 20% each year over four years, and 100,000 stock
options were issued to two new employees with exercise prices of
$1.59 which vest 20% each year over five years. All of these stock
options have ten year terms.
The Company applies Accounting Principles Board Opinion 25 and
related Interpretations (APB 25) in accounting for stock options
and warrants issued to employees and Directors. Accordingly,
compensation cost is recognized based on the intrinsic value of the
stock options or warrants.
Because stock options and warrants issued to independent contractor
representatives and consultants, do not fall within the scope of
APB 25, compensation expense is recorded for these instruments
based on the fair value method, as computed in accordance with
Statement of Financial Accounting Standards No. 123 (FAS 123).
Had compensation cost for all of the Company's stock-based awards
been determined in accordance with FAS 123, the Company's net
income and earnings per share would have been reduced to the pro
forma amounts indicated below:
Nine Months Ended
November 30, 2000 November 30, 1999
Net income (loss) As reported ($2,997,613) $ 125,519
Pro forma ($3,781,218) ($ 753,278)
Basic earnings per share
As reported ($ 0.35) $ 0.01
Pro forma ($ 0.45) ($ 0.09)
Diluted earnings per share
As reported ($ 0.35) $ 0.01
Pro forma ($ 0.45) ($ 0.09)
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 2001, the average expected
volatility is 47.33%, and the average assumed risk-free interest
rate is 6.56%. 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 November 30, 2000 and 1999 and changes during the nine
months then ended, is presented below:
Options
Warrants
Exercise Exercise
Shares Price Shares Price
Outstanding March 1, 1999 951,010 $ 6.098 243,000 $ 6.118
Granted 167,500 $ 4.499 82,000 $ 4.499
Exercised (6,400) $ 2.125
Forfeited (2,500) $ 4.145 3,000 $ 4.750
Expired unexercised (600) $14.750
Outstanding Nov. 30, 1999 1,109,010 $ 5.879 322,000 $ 5.719
Exercisable Nov. 30, 1999 799,456 $ 5.354 322,000 $ 5.719
Outstanding March 1, 2000 1,174,010 $ 5.559 392,000 $ 5.099
Granted 200,000 $ 1.595 1,010,000 $ 1.601
Expired unexercised (19,950) $ 8.709
Forfeited (12,050) $ 6.451
Outstanding Nov. 30, 2000 1,342,010 $ 4.927 1,402,000 $ 2.579
Exercisable Nov. 30, 2000 978,760 $ 5.268 602,000 $ 3.881
Weighted-average fair value
of options and warrants
granted during the nine months,
computed in accordance
with FAS 123 $ 1.092 $ 1.231
The following table summarizes information about fixed stock
options and warrants outstanding at November 30, 2000:
Options Warrants
Range of exercise prices $14.750 - $16.875 $14.750
Number outstanding 247,510 70,000
Weighted-average remaining
contractual life in years 7.443 7.444
Weighted-average exercise price $14.759 $14.750
Number exercisable 198,010 70,000
Range of exercise prices $4.375 - $4.500 $4.440 - $4.500
Number outstanding 157,500 82,000
Weighted-average remaining
contractual life in years 8.450 8.446
Weighted-average exercise price $4.499 $4.499
Number exercisable 94,500 82,000
Range of exercise prices $1.590 - $2.875 $1.600 - $2.875
Number outstanding 937,000 1,250,000
Weighted-average remaining
contractual life in years 5.464 8.879
Weighted-average exercise price $2.402 $1.772
Number exercisable 686,250 450,000
(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 $226,315 as of November 30, 2000, which was in excess of
its required minimum net capital of $100,000. The ratio of
aggregate indebtedness to net capital was 4.4 to 1 as of November
30, 2000. BSFS is also subject to regulations of the District of
Columbia and thirty states in which it is registered as a licensed
broker-dealer.
DHCM 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.
The Company's NASD broker-dealer subsidiary provides investment
management services to an agency of the State of Ohio. In
conjunction with these services the subsidiary has agreed to
indemnify the agency against losses resulting from violation of the
investment management agreement or violation of fiduciary duties
under applicable law.
In the normal course of business, the Company's NASD broker-dealer
subsidiary is a market maker for a limited number of community bank
stocks, and quotes bid and ask prices for those stocks. In the
event of sudden price movements, the subsidiary may be required to
honor a quote at an undesirable price. The subsidiary controls
this risk by monitoring markets closely and updating quotes as
required and generally limits its quotes to 100 or 200 shares of a
given bank stock.
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 exposes 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 November 30, 2000, the Company had
short security positions of $511,000, and 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 nine months ended November
30, 2000. Senior management of the Company is responsible for
reviewing trading positions, exposures, profits and losses, trading
strategies and hedging strategies on a daily basis.
The Company's significant industry concentration, which arises
within its normal course of business activities, is with financial
institutions for bank securities transactions.
(12) SEGMENT INFORMATION
With the change in top management in May of this year, the Company
has shifted its emphasis from its traditional investment related
activities at its BSFS subsidiary, to the investment advisory
services of its DHCM subsidiary. In conjunction with this change
in emphasis, the Company redefined its operating segments effective
June 1, 2000. These segments have been designed to aid the
operating decision makers in deciding how to allocate resources and
in assessing performance. Segment information for prior periods
has been restated to conform to the new segments.
Description of the types of services from which each reportable
segment derives its revenues
The Company has three reportable segments: Diversified Investment
Advisory Services, Brokerage and Bank Stock Investment Advisory
Services and Corporate Portfolio. The Diversified Investment
Advisory Services segment provides investment advisory services to
the Diamond Hill Focus Fund and The Banc Stock Group Fund, open-end
mutual funds, and offers investment advisory services and accounts
to institutional and individual investors, specializing in
diversified, domestic securities. The Brokerage and Bank Stock
Investment Advisory Services segment offers brokerage, investment
banking and investment advisory services and accounts to
institutional and individual investors, specializing in regional
and community bank stocks. The Corporate Portfolio segment is
represented by revenue generating investments unrelated to the
other operating segments.
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
Company evaluates performance based on profit or loss from
operations before income taxes. The Company focuses its attention
on providing services to external customers.
Factors management used to identify the enterprises's reportable
segments
The Company's reportable segments are primarily defined by legal
entities that specialize in different financial products and
services. Diversified Investment Advisory Services are provided by
DHCM. Brokerage and Bank Stock Investment Advisory Services are
provided primarily by BSFS, however, this segment also includes
the results of Buckeye Bancstocks. The Corporate Portfolio segment
is managed by the parent Company. These segments are managed
separately because each entity operates in a different regulatory
environment.
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.
Financial information for the nine months ended November 30, 2000
Brokerage &
Diversified Banc Stock
Investment Investment
Revenue from external Advisory Advisory Corporate
customers: Services Services Portfolio Combined
Trading Profits (Losses) ($74,455) ($232,565)($1,361,723)($1,668,743)
Fees & Commissions 144,917 754,025 6,542 905,484
Investment banking 32,982 32,982
Dividends 14 44,077 218,112 262,203
Intersegment revenues
Interest revenue 14,626 26,922 41,548
Interest expense 2,434 3,414 5,848
Depreciation and
amortization 18,430 27,666 9,216 55,312
Segment income (loss)
before taxes (596,776) (1,186,107) (1,343,695) (3,126,578)
Segment assets 831,690 2,943,287 6,951,269 10,726,246
Expenditures for
segment assets 6,433 6,433 3,216 16,082
Reconciliation to Consolidated Financial Statements
Income (loss) before taxes for reportable segments ($3,126,578)
Write down of investment in ShareholderOnline, Inc. (242,200)
Other corporate expenses (200,655)
Income (loss) before taxes - Consolidated ($3,569,433)
Financial information for the quarter ended November 30, 2000
Diversified Brokerage &
Investment Investment
Revenue from external Advisory Advisory Corporate
customers: Services Services Portfolio Combined
Trading Profits (Losses) ($74,455) ($48,063) ($607,893) ($730,411)
Fees & Commissions 71,811 116,692 (5,141) 183,362
Dividends 14 34,490 62,307 96,811
Intersegment revenues _
Interest revenue 4,542 8,626 13,168
Interest expense 1,942 9 1,951
Depreciation and
amortization 6,230 6,488 3,006 15,724
Segment income (loss)
before taxes (239,648) (193,224) (797,871) (1,230,743)
Segment assets 831,690 2,943,287 6,951,269 10,726,246
Expenditures for
segment 973 973 487 2,433
Reconciliation to Consolidated Financial Statements
Income (loss) before taxes for reportable segments ($1,230,743)
Write down of investment in ShareholderOnline, Inc. (242,200)
Other corporate items 3,645
Income (loss) before taxes - Consolidated ($1,469,298)
Financial information for the nine months ended November 30, 1999
Diversified Brokerage &
Investment Investment
Revenue from external Advisory Advisory Corporate
customers: Services Services Portfolio Combined
Trading Profits (Losses) $256,079 $150,268 $406,347
Fees & Commissions $226,146 1,737,378 20,048 1,983,572
Investment banking 649,736 649,736
Dividends 11,400 184,214 195,614
Intersegment revenues
Interest revenue 17,300 16,742 34,042
Interest expense 1,346 685 2,031
Depreciation and
amortization 11,876 55,855 5,938 73,669
Segment income (loss)
before taxes (324,845) 212,272 342,542 229,969
Segment assets 121,611 3,115,351 10,603,068 13,840,030
Expenditures for
segment assets 14,289 35,722 7,145 57,156
Financial information for the quarter ended November 30, 1999
Diversified Brokerage &
Investment Investment
Revenue from external Advisory Advisory Corporate
customers: Services Services Portfolio Combined
Trading Profits (Losses) $24,425 ($366,141) ($341,716)
Fees & Commissions $56,876 474,722 6,533 538,131
Investment banking 337,609 337,609
Dividends 2,386 75,561 77,947
Intersegment revenues
Interest revenue 5,681 7,198 12,879
Interest expense 511 (1) 510
Depreciation and
amortization 3,973 18,656 1,986 24,615
Segment income (loss)
before taxes (103,475) (69,632) (282,986) (456,093)
Segment assets 121,611 3,115,351 10,603,068 13,840,030
Expenditures for
segment assets 2,391 5,978 1,196 9,565
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
With the change in executive management in May of 2000, the Company
has shifted its emphasis from its traditional investment related
activities through its BSFS subsidiary, to the investment advisory
services of its DHCM subsidiary. DHCM manages portfolios of stocks
representing interests in entities operating in various economic
sectors, as opposed to a portfolio of bank stocks only. Staffing
and costs associated with this shift and the various marketing
initiatives at DHCM will negatively impact the Company for the
remainder of 2000 calendar year, and most likely the entire 2001
calendar year. Management believes that this process is necessary
in order to achieve a critical threshold of assets under management
to support operations in the future. However, there can be no
assurance that the Company will be able to achieve the critical
threshold of assets under management necessary to support the
Company's operations in the future.
Forward-looking Statements
Throughout this discussion, the Company may make forward-looking
statements relating to such matters as anticipated operating
results, prospects for achieving the critical threshold of assets
under management, technological developments, economic trends
(including interest rates and market volatility), expected
transactions and acquisitions and similar matters. 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, the actual results and
experiences of the Company could differ materially from the
anticipated results or other expectations expressed by the Company
in its forward-looking statements. Factors that could cause such
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.
Nine Months Ended November 30, 2000, Compared to the Nine Months
Ended November 30, 1999
Revenues and trading gains and losses for the nine months ended
November 30, 2000 decreased to net losses of $430,525 compared to
positive revenue and net gains of $3,269,311 for the nine months
ended November 30, 1999. This decrease results primarily from
decreases in revenue from trading profits (losses), management fees
and commissions and investment banking.
Revenues from trading profits were a loss of $1,668,742 for the
nine months ended November 30, 2000 compared to profits of $406,347
for the nine months ended November 30, 1999. These trading losses
result primarily from decreases in market values of financial
services sector securities. Market values in the small-capitalization
banking sector experienced a significant correction
in the second fiscal quarter of 1998 and have not recovered
through November 30, 2000. However, one security in the financial
services sector accounts for 48% of the year-to-date loss. The
trading portfolios have been reduced significantly by liquidation,
and management is unable to predict how future fluctuations in
market values will impact the performance of the Company's
remaining trading portfolios.
The Company generated management fees and commission revenue of
$905,484 for the nine months ended November 30, 2000 compared to
$1,983,572 for the nine months ended November 30, 1999, a decrease
of 54%. The decrease is primarily attributable to depressed market
values in the community banking sector securities which reduced
asset values on which management fees are based. Depressed market
values also caused some customers to close their accounts and
reduced the buying and selling activity in commission generating
retail accounts. DHCM has initiated a program to attempt to gather
assets under management and to invest client assets in more diverse
economic sectors to reduce the impact of the decreases in the
market value of community banking sector securities.
Revenues from investment banking for the nine months ended November
30, 2000 decreased to $32,982 compared to $649,736 for the nine
months ended November 30, 1999, a decrease of 95%. Because of
weakness in the regional and community banking sector the Company
has not engaged in any investment banking transactions since
November 1999. There are no investment banking engagements in
progress and none are being pursued.
Operating expenses for the nine months ended November 30, 2000,
increased to $3,138,908 compared to $3,039,342 for the nine months
ended November 30, 1999, an increase of 3%. A large portion of
this increase results from the write-off of goodwill related to
Buckeye Bancstocks, Inc., a wholly-owned subsidiary of the Company,
that was liquidated during the first fiscal quarter, and the write
down of the investment in ShareholderOnline, Inc. Brokers'
commission expenses decreased to $488,978 for the nine months ended
November 30, 2000 compared to $941,371 for the nine months ended
November 30, 1999, a decrease of 48%. This decrease results from
commission expenses related to management fees and commission
revenue discussed above. Salaries, benefits, and payroll taxes
increased to $1,067,679 for the nine months ended November 30, 2000
compared to $796,564 for the nine months ended November 30, 1999,
an increase of 34%. Salaries include compensation expense relating
to stock warrants issued to the newly recruited President of the
Company of $87,750 for the period. In addition, personnel have
been hired to position DHCM for the anticipated growth of assets
under management. Professional fees increased to $327,600 for the
nine months ended November 30, 2000 compared to $307,187 for the
nine months ended November 30, 1999, an increase of 7%. This
increase results primarily from expenses related to DHCM creating
and sponsoring a second mutual fund, the Diamond Hill Focus Fund
(symbol DIAMX). General and administrative expenses decreased to
$696,858 for the nine months ended November 30, 2000 compared to
$992,189 for the nine months ended November 30, 1999, a decrease of
30%. This decrease results from reductions of a broad range of
expenses including, advertising, investment banking expenses,
printing, travel, supplies, and postage and delivery costs.
ShareholderOnline, Inc., an Ohio corporation establishing an
electronic stock information service and alternative trading
system, was under common management with the Company through April
27, 2000. Because of the common management, the Company's 16%
ownership investment in ShareholderOnline, Inc., was accounted for
on the equity method of accounting through the end of April 2000.
During 1999, ShareholderOnline, Inc., formalized its plans to raise
additional capital to launch its operations. Also, the Boards of
Directors of the Company and ShareholderOnline, Inc., recognized
that separate management was required to effectively execute
ShareholderOnline Inc.'s business plan, and on April 27, 2000, the
President and CEO of ShareholderOnline, Inc., resigned his
positions with the Company to devote his full attention to
ShareholderOnline, Inc. During 2000, ShareholderOnline, Inc.,
began pursuing separate investment and financing alternatives. The
use of the equity method of accounting for the investment in
ShareholderOnline, Inc., was discontinued as of May 1, 2000. The
Company recognized equity in the net losses of ShareholderOnline,
Inc., of $60,680 for the nine months ended November 30, 2000,
compared to losses of $63,450 for the nine months ended November
30, 1999.
The President and CEO of ShareholderOnline, Inc., subsequently
resigned his positions with ShareholderOnline, Inc., effective
October 19, 2000. Because of ShareholderOnline's unsuccessful
attempts to raise additional capital through November 30, 2000, the
Company has written down its investment in ShareholderOnline, Inc.,
to the Company's proportionate share of net book value. This
resulted in a write down of $242,200.
Quarter Ended November 30, 2000, Compared to the Quarter Ended
November 30, 1999
Revenues and trading gains and losses for the quarter ended
November 30, 2000 decreased to net losses of $441,070 compared to
positive revenues and trading gains and losses of $624,849 for the
quarter ended November 30, 1999. This decrease results primarily
from decreases in revenue from trading profits (losses), management
fees and commissions and investment banking fees.
Revenues from trading profits were a loss of $730,411 for the
quarter ended November 30, 2000 compared to a loss of $341,716 for
the quarter ended November 30, 1999. These trading losses result
primarily from decreases in market values of financial services
sector securities. One security in the financial services sector
accounts for a loss of $807,390 during the quarter. The Company has
appointed a new President. One of his responsibilities is to
institute new investment policies for the Company. The trading
portfolios have been reduced significantly by liquidation, and
management is unable to predict how future fluctuations in market
values will impact the performance of the Company's remaining
trading portfolios.
The Company generated management fees and commission revenue of
$183,362 for the quarter ended November 30, 2000 compared to
$538,130 for the quarter ended November 30, 1999, a decrease of
66%. The decrease is primarily attributable to depressed market
values in the community banking sector securities which reduced
asset values on which management fees are based. Depressed market
values also caused some customers to close their accounts and
reduced the buying and selling activity in commission generating
retail accounts. DHCM has initiated a program to attempt to gather
assets under management and to invest client assets in more diverse
economic sectors to reduce the impact of the decrease in the market
value of community banking sector securities.
There were no revenues from investment banking for the quarter
ended November 30, 2000, compared to $337,609 for the quarter ended
November 30, 1999. Because of weakness in the regional and
community banking sector the Company has not engaged in any
investment banking transactions since November 1999. There are no
investment banking engagements in progress and none are being
pursued.
Operating expenses for the quarter ended November 30, 2000,
decreased to $1,028,228 compared to $1,080,942 for the quarter
ended November 30, 1999, a decrease of 5%. Brokers' commission
expenses decreased to $108,351 for the quarter ended November 30,
2000 compared to $345,473 for the quarter ended November 30, 1999,
a decrease of 69%. This decrease results from commission expenses
related to management fees and commission revenue discussed above.
Salaries, benefits, and payroll taxes increased to $374,176 for the
quarter ended November 30, 2000 compared to $281,411 for the
quarter ended November 30, 1999, an increase of 33%. This increase
results from personnel being hired to position DHCM for the
anticipated growth of assets under management. Professional fees
increased to $103,534 for the quarter ended November 30, 2000
compared to $73,931 for the quarter ended November 30, 1999, an
increase of 40%. This increase results from legal and consulting
services associated with the Company creating and sponsoring the
Diamond Hill Focus Fund, a diversified mutual fund. General and
administrative expenses decreased to $198,016 for the quarter ended
November 30, 2000 compared to $379,617 for the quarter ended
November 30, 1999, a decrease of 48%. This decrease results from
reductions of a broad range of expenses including, advertising,
investment banking expenses, printing, travel, supplies, and
postage and delivery costs.
ShareholderOnline, Inc., an Ohio corporation establishing an
electronic stock information service and alternative trading
system, was under common management with the Company through April
27, 2000. Because of the common management, the Company's 16%
ownership investment in ShareholderOnline, Inc., was accounted for
on the equity method of accounting through the end of April 2000.
During 1999, ShareholderOnline, Inc., formalized its plans to raise
additional capital to launch its operations. Also, the Boards of
Directors of the Company and ShareholderOnline, Inc., recognized
that separate management was required to effectively execute
ShareholderOnline Inc.'s business plan, and on April 27, 2000, the
President and CEO of ShareholderOnline, Inc., resigned his
positions with the Company to devote his full attention to
ShareholderOnline, Inc. During 2000, ShareholderOnline, Inc.,
began pursuing separate investment and financing alternatives. The
use of the equity method of accounting for the investment in
ShareholderOnline, Inc., was discontinued as of May 1, 2000.
Therefore, the Company did not recognize any equity in the losses
of ShareholderOnline, Inc., for the quarter ended November 30,
2000, compared to losses of $50,440 for the quarter ended November
30, 1999.
The President and CEO of ShareholderOnline, Inc., subsequently
resigned his positions with ShareholderOnline, Inc., effective
October 19, 2000. Because of ShareholderOnline's unsuccessful
attempts to raise additional capital, the Company has written down
its investment in ShareholderOnline, Inc., to the Company's
proportionate share of net book value. This resulted in a write
down of $242,200.
Liquidity and Capital Resources
Approximately 41% of the value of the Company's trading portfolio
is comprised of small capitalization bank stocks which are thinly
traded and there can be no assurance that active markets will
develop. The failure of such markets to develop could negatively
affect the Company's operations and financial condition.
Approximately 59% of the Company's trading portfolio is readily
marketable. 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. Accordingly, the
value of these securities may be overstated.
As of November 30, 2000, the Company had working capital of
approximately $9,270,000. Working capital includes cash,
securities owned and accounts and notes receivable, net of all
liabilities. 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
the Company's customers transactions. The Company is, therefore,
exposed to off-balance sheet risk of loss in the event that its
customers are unable to fulfill contractual obligations. The
Company manages this risk by requiring its 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 its
customers being unable to fulfill contractual obligations.
The Company's NASD broker-dealer subsidiary provides investment
management services to an agency of the State of Ohio. In
conjunction with these services, the subsidiary has agreed to
indemnify the agency against losses resulting from violation of the
investment management agreement or violation of fiduciary duties
under applicable law.
In the normal course of business, the Company's NASD broker-dealer
subsidiary is a market maker for a limited number of community bank
stocks and quotes bid and ask prices for those stocks. In the
event of sudden price movements, the subsidiary may be required to
honor a quote at an undesirable price. The subsidiary attempts to
control this risk by monitoring markets closely and updating quotes
as required and generally limits its quotes to 100 or 200 shares of
a given bank stock.
In the normal course of business, the Company may sell securities
it has not yet purchased (short sales) for its own account, and may
write options. The establishment of short positions and option
contracts exposes 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 November 30, 2000, the Company had $511,000 of 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 nine months ended November 30, 2000. Senior management of the
Company is responsible for reviewing trading positions, exposures,
profits and losses, trading strategies and hedging strategies on a
daily basis.
The Company's most significant industry concentration, which arises
within its normal course of business activities, is with financial
institutions for securities transactions.
The net cash balance increased $1,614,636 during the nine months
ended November 30, 2000. Net cash provided by operating activities
was $1,236,911. The primary source of this cash flow results from
the sale of securities in the trading portfolio.
Investing activities provided $6,553 of cash during the nine months
ended November 30, 2000, primarily from the disposal of computer
equipment.
Financing activities provided $371,172 of cash during the nine
months ended November 30, 2000, primarily from the sale of treasury
stock.
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.
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.
THE BANC STOCK GROUP, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule
b) Form 8-K dated December 15, 2000 was filed to
report the change in the Company's fiscal year-end
to December 31 from the last day of February.
Therefore, a Form 10-KSB transition report will be
filed for the ten month transition period from
March 1, 2000, through December 31, 2000.
SIGNATURES
In accordance with the requirements 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.
(Registrant)
Date January 10, 2000 /S/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.
President
Date January 10, 2000 /S/ Jeffrey C. Barton
Jeffrey C. Barton
Chief Financial Officer
(chief financial and chief accounting officer)
