SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 1-8185
BLC FINANCIAL SERVICES, INC.
- - --------------------------------------------------------------------------------
Delaware 75-1430406
- - --------------------------------------------------------------------------------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
919 Third Avenue, 17th Floor, New York, New York 10022
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-751-5626
None
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No|_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
----- -----------------------------
Common stock $.01 par value 16,882,052
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying financial statements and information are submitted as
required by Form 10-Q. The financial information does not include all
disclosures that are required by generally accepted accounting
principles.
In the opinion of management, all adjustments that are necessary to
present fairly, the financial position of BLC Financial Services, Inc.
(the "Company") for the periods included, have been made.
2
<PAGE>
BLC FINANCIAL SERVICES, INC.
PART I FINANCIAL INFORMATION
NINE MONTHS ENDED MARCH 31, 1996
3
<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, June 30,
1996 1995
----------- -----------
Loans receivable, net $11,661,986 $ 9,717,402
Cash 172,634 125,368
Restricted cash 142,623 87,459
Accounts receivable - loans sold 2,555,705 309,375
Accounts and other receivables 135,266 136,196
Prepaid expenses 5,527
Furniture and equipment, net of
accumulated depreciation 140,558 47,740
Deferred financing costs, net of
accumulated amortization 50,332 72,971
Security deposits 20,533 18,976
----------- -----------
TOTAL ASSETS $14,885,164 $10,515,487
=========== ===========
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, June 30,
------------ ------------
1996 1995
------------ ------------
LIABILITIES
Notes payable $ 9,466,789 $ 5,084,200
Accounts payable & accrued expenses 397,924 487,929
Debt 586,265 1,582,420
Customer deposits 152,262 100,517
Minority Interest 658,862 653,008
------------ ------------
TOTAL LIABILITIES 11,262,102 7,908,074
------------ ------------
Commitments and contingencies (Note 3)
SHAREHOLDERS' EQUITY
Preferred Stock, $10 par value:
Authorized - 2,000,000 shares
Issued and outstanding - none
Common Stock, $0.01 par value:
Authorized - 35,000,000 shares
Issued and outstanding - 16,882,052 shares
March 31, 1996 and 13,178,348 shares June
30, 1995 168,820 131,783
Additional paid in capital 6,391,576 5,428,613
Deficit (2,937,334) (2,952,983)
------------ ------------
3,623,062 2,607,413
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 14,885,164 $ 10,515,487
============ ============
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
PART I - FINANCIAL STATEMENT
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid in Accumulated
Shares Amount Capital Deficit Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, as previously reported,
June 30, 1995 11,369,527 $113,695 $ 5,446,601 $(2,872,620) $ 2,687,676
Pooling of interest (Note 5) 1,808,821 18,088 (17,988) (80,363) $ (80,263)
---------- -------- ----------- ----------- -----------
Balance, as restated, June 30, 1995 13,178,348 131,783 5,428,613 (2,952,983) 2,607,413
Net income for the nine months
ended March 31, 1996 15,649 15,649
Issuance of common stock 3,703,704 37,037 962,963 -- 1,000,000
---------- -------- ----------- ----------- -----------
Balance, March 31, 1996 16,882,052 168,820 6,391,576 (2,937,334) 3,623,062
========== ======== =========== =========== ===========
The accompanying notes are an integral part of these
financial statements.
</TABLE>
6
<PAGE>
PART I - FINANCIAL STATEMENTS
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Gain on sale of loans $ 572,114 $ 224,988 $ 867,545 $ 882,935
Interest income 340,731 215,520 954,337 526,050
Service fee income 143,113 107,112 394,560 281,460
Miscellaneous 45,175 18,820 81,755 69,709
----------- ----------- ------------ -----------
1,101,133 566,440 2,298,197 1,760,154
----------- ----------- ------------ -----------
EXPENSES
Operating costs 659,007 393,131 1,520,990 1,141,541
General and administrative 173,411 14,609 227,397 102,825
Interest 166,257 83,530 633,225 180,248
Minority interest in net income
of subsidiary 15,198 15,719 5,854 50,524
----------- ----------- ------------ -----------
1,013,873 506,989 2,387,466 1,475,138
----------- ----------- ------------ -----------
NET INCOME BEFORE
EXTRAORDINARY ITEM 87,260 59,451 (89,269) 285,016
EXTRAORDINARY ITEM
Gain on extinguishment of debt (Note 4) 104,918 -- 104,918 --
----------- ----------- ------------ -----------
NET INCOME 192,178 59,451 15,649 285,016
=========== =========== ============ ===========
NET INCOME BEFORE EXTRAORDINARY
ITEM PER COMMON SHARE $ 0.01 $ 0.00 $ (0.01) $ 0.02
=========== =========== ============ ===========
NET INCOME PER COMMON SHARE $ 0.01 $ 0.00 $ 0.00 $ 0.02
=========== =========== ============ ===========
Weighted average number of common
shares and equivalents outstanding 13,748,149 13,638,995 13,366,900 13,638,995
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
PART I - FINANCIAL STATEMENT
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the nine months ended
March 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 15,649 $ 285,016
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 14,267 29,573
Amortization 22,639 11,520
Minority interest in profits 5,854 50,524
Provision for loan losses 75,302 125,172
Extraordinary item, gain on
extinguishment of debt (104,918)
Changes in assets and liabilities:
Loans receivable, net (2,008,419) (2,889,828)
Accounts receivable - loans sold (2,246,330) 1,070,016
Accounts and other loans receivable 930 (27,539)
Prepaid expenses (5,527) --
Security deposits (1,557) --
Accounts payable & accrued expenses 14,913 339,648
Deferred income (6,954) 31,523
Customer deposits 51,745 --
Net liabilities for discontinued operations -- (27,664)
----------- -----------
Net cash provided by (used in) operating activities (4,172,406) (1,002,039)
Cash flows from investing activities:
Acquisition of equipment (107,085) (15,861)
----------- -----------
Subtotal $(4,279,491) $(1,017,900)
----------- -----------
The accompanying notes are an integral part of these
financial statements.
8
<PAGE>
PART I - FINANCIAL STATEMENT
BLC FINANCIAL SERVICES, INC
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the nine months ended
March 31,
1996 1995
---- ----
Balance forward $ (4,279,491) $(1,017,900)
------------ -----------
Cash flows from financing activities:
Proceeds from notes payable 12,656,962 6,763,590
Proceeds from issuance of debentures -- 600,000
Principal payments on notes payable (8,274,373) (6,203,654)
Principal payments on debentures (1,000,668) (4,350)
Advances for deferred financing costs -- (39,539)
Securities registration costs (51,309)
Proceeds from issuance of common stock (Note 4) 1,000,000 --
------------ -----------
Net cash provided by (used in) financing activities 4,381,921 1,064,738
------------ -----------
Net increase (decrease) in cash 102,430 46,838
Cash - beginning of period 212,827 57,357
------------ -----------
Cash - end of period $ 315,257 $ 104,195
============ ===========
Non cash transactions
Conversion, loans payable to debentures payable -- 500,000
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during period for interest expense $ 628,158 $ 180,248
============ ===========
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in conformity with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and the
applicable rules of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine month period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1996. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended June 30, 1995.
Principles of consolidation and preparation
The accompanying consolidated financial statements include the accounts of
BLC Financial Services, Inc. (the Company), its wholly owned corporate
subsidiaries and, its majority owned partnership (the "Partnership"). The
Company acquired a majority of the Partnership in 1990. The Company's ownership
interest in the Partnership at December 31, 1995 was approximately 88%.
Business operations
The Company is primarily engaged in the business of making and servicing
loans to small businesses under the Section 7A Guaranteed Loan Program sponsored
by the United States Small Business Administration.
10
<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996
(Unaudited)
1. BASIS OF PRESENTATION (continued)
Revenue recognition
At origination, the Company determines the estimated fair value of the
guaranteed and unguaranteed portions of the loan and the excess servicing
rights, if any. The cost allocated to each component is based upon the relative
fair values. Upon sale of the guaranteed portion of the loan, the Company
recognizes the lesser of the premium received or the difference between the
sales price and the cost allocated to this component. The excess of the premium
received over the gain recognized, if any, is deferred and amortized into income
over the life of the loan.
The Company ceases to accrue interest income on loan receivables which
become 30 days delinquent. Gains on the sale of loan receivables are recorded on
the settlement date using the specific identification method.
Per share information
Income per share was computed using the weighted average number of shares
and common stock equivalents outstanding during the period. Fully diluted
earnings per share is not presented as the effect would be immaterial or
antidilutive.
11
<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996
(Unaudited)
2. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses for the nine months ended March 31, 1996 and
1995 are as follows:
1996 1995
---- ----
Balance at June 30 $ 710,748 $ 567,489
Provision for loan losses 75,302 108,185
Reclassification of deferred income attributable
to non-performing loans - 0 - 36,382
Write-off (72,916) (21,395)
Recoveries - 0 - 2,000
--------- ---------
Balance at March 31 $ 713,134 $ 692,661
========= =========
3. COMMITMENTS AND CONTINGENCIES:
a. Litigation
The Company is a defendant in a lawsuit, filed in July 1995, with an
affiliate of the former minority partner of Business Loan Center G.P. seeking
approximately $475,000 primarily in connection with certain expenses incurred
prior to the Company's acquisition of the subsidiary. Management is vigorously
contesting this matter. While the outcome cannot be determined, the Company has
accrued $100,000 for this matter.
The Partnership has been named as defendant in a lawsuit arising out of the
normal course of business activities seeking approximately $100,000. Management
is vigorously contesting this matter. The outcome cannot be determined, and no
provision for any liability that may result has been made in the financial
statements.
12
<PAGE>
BLC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996
(Unaudited)
4. EXTRAORDINARY ITEM
Gain on extinguishment of debt
On March 18, 1996, the Company, in a private placement transaction, issued
3,703,704 of its common stock for $ 1,000,000. These proceeds were used to repay
$1,000,000. in debentures issued in 1994 and 1995. In addition, the debenture
holders agreed to forgive the accrued interest on this debt totaling $104,918.
This sum has been classified as an extraordinary item.
5. POOLING OF INTEREST
On February 5, 1996, the Company, through its wholly-owned subsidiary, BLC
Financial Network, Inc. exchanged 1,808,821 shares of its common stock for all
of the issued and outstanding common stock of Southeastern 1st Financial
Network, Inc.(Southeastern). The transaction has been accounted for as a pooling
of interest. Accordingly, the consolidated balance sheet as of June 30, 1995 has
been restated. However, since Southeastern's operations commenced in April 1995,
the statements of income for the three months ended and nine months ended March
31, 1995 have not been restated.
13
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 1996
Results of Operations:
Quarter Ended March 31, 1996 vs. Quarter Ended March 31, 1995
The Company recorded net income of $192,178 (or $.01 per share) for the three
months ended March 31, 1996, as compared to net income of $59,451 (or $.00 per
share) for the three months ended March 31, 1995.
Revenues for the three months ended March 31, 1996, which approximated
$1,101,133, increased by 94% from the prior year's period due primarily to
higher premium, servicing and interest income generated from Business Loan
Center's serviced loan portfolio. This is directly attributable to (i) a 25%
increase in the loan portfolio, which approximated $62.0 million at March 31,
1996, as compared to approximately $49.6 million at March 31, 1995, and (ii) the
increased volume of loans originated and sold in the secondary market for gains
of approximately $572,114, a 154% increase from the quarter ended March 31,
1995.
Interest income increased from $215,520 for the three months ended March 31,
1995 to $340,731 for the three months ended March 31, 1996, or by 58%. This
resulted from a 34% increase in the unguaranteed or retained loan portfolio,
which approximated $12.5 million at March 31, 1996 as compared to $9.3 million
at March 31, 1995. Substantially all performing loans at March 31, 1996 were
carrying interest rates between 11% and 11-3/4%, which is consistent with the
prior year's period.
Service fee income, which increased by 34% from the prior year's quarter,
approximated $143,113 at March 31, 1996. This increase directly resulted from
the increased performing loan portfolio and the receipt of additional servicing
fees of between 1.0% to 2.6% per annum on longer maturity loans. Approximately
85% of the loans originated during the quarter ended March 31, 1996 had
maturities exceeding twenty (20) years.
Loans in the aggregate principal amount of $5,721,337 were originated during the
three months ended March 31, 1996, as compared to loans in the aggregate
principal amount of $3,284,500 for the three months ended March 31, 1995,
representing a 74% increase in origination activities during the referenced
periods. The SBA guaranteed principal amount of the loans originated during the
three months ended March 31, 1996 aggregated $4,844,569, as compared to
aggregate guaranteed principal of $2,525,625 for the prior year's period. In
addition to the newly originated loans, two loans, which aggregated $1,040,000
and originated in prior periods, completed final disbursement and were available
for sale in the secondary market during the quarter ended March 31, 1996. Of
14
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 1996
Results of Operations:
Quarter Ended March 31, 1996 vs. Quarter Ended March 31, 1995 (continued)
those loans originated and/or completely funded during the quarter ended March
31, 1996, substantially all were sold in the secondary market immediately
subsequent to the closing of each loan, resulting in gains on the sale of loans
of $572,114 for the three months ended March 31, 1996, as compared to gains of
$224,988 for the prior year's period. A portion of the gross gains has been
deferred for both periods in accordance with generally accepted accounting
principles.
The increase in loan origination activities and the accompanying increase in
gains on the sale of loans in the secondary market during the quarter ended
March 31, 1996 was a direct result of (i) the recent acquisition of a loan
origination company, headquartered in Richmond, Virginia, and (ii) the
resolution of the federal budget impasse, and the termination of the temporary
government furlough, which occurred during the later months of 1995. More
specifically, on February 5, 1996, the Company, through its wholly-owned
subsidiary, BLC Financial Network, Inc., acquired all of the issued and
outstanding common stock of Southeastern First Financial Network, Inc. in
exchange for 1,808,821 shares of the Company's common stock. With respect to the
effects of legislative actions upon origination activities, the federal budget
impasse and the governmental furlough which ensued during prior periods created
a significant backlog in the loan origination and closing processes. This
backlog was remedied during the quarter ended March 31, 1996.
At March 31, 1996, fifteen (15) loans in the approximate aggregate principal
amount of $7.2 million had received both Business Loan Center and SBA approval
and were awaiting settlement. An additional twenty-six (26) proposed loans in
the approximate aggregate principal amount of $18.3 million had been approved by
Business Loan Center and were either awaiting submission to the SBA or had been
submitted to the SBA and were awaiting approval.
Operating expenses of the Company increased by 68% over the prior year's quarter
due to the additional overhead costs resulting from the acquisition of
Southeastern First Financial Network, Inc. Additionally, with the growth in loan
origination activities, commission costs for the quarter ended March 31, 1996
increased to $186,962 from $80,659 for the prior year's quarter.
General and administrative expenses for the three months ended March 31, 1996
increased substantially from the three months ended March 31, 1995, as a result
of (i) increased general expenses, including rent and insurance expenditures,
resulting from the acquisition, and (ii) increased professional fees incurred in
connection with the acquisition.
15
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 1996
Results of Operations:
Quarter Ended March 31, 1996 vs. Quarter Ended March 31, 1995 (continued)
Interest expense increased during the three months ended March 31, 1996 as
compared to the prior year's period, as Business Loan Center's borrowings under
its bank line increased from the prior year's period to fund the continued
growth in the loan portfolio.
In addition, during the quarter ended March 31, 1996, the Company repaid
$1,000,000 in debentures. The debenture holders agreed to forgive the accrued
interest on this debt, totaling $104,918, which has been classified as an
extraordinary item.
16
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
NINE MONTHS ENDED MARCH 31, 1996
Results of Operations:
Nine Months Ended March 31, 1996 vs. Nine Months Ended March 31, 1995
The Company recorded net income of $15,649 (or $.00 per share) for the nine
months ended March 31, 1996, as compared to net income of $285,016 (or $.02 per
share) for the nine months ended March 31, 1995. Revenues for the nine months
ended March 31, 1996 increased by approximately 31% from the prior year's period
due to the growth in the Company's loan portfolio. As a result of this increased
loan portfolio, interest and servicing income experienced substantial yields
during the nine months ended March 31, 1996.
Interest income increased from $526,050 for the nine months ended March 31, 1995
to $954,337 for the nine months ended March 31, 1996, or by approximately 81%.
This substantial increase resulted from Business Loan Center's increased
performing loan portfolio. Substantially all performing loans during the nine
months ended March 31, 1996 were carrying interest rates between 11% and
11-3/4%, which is consistent with the prior year's period.
Service fee income increased from $281,460 for the nine months ended March 31,
1995 to $394,560 for the nine months ended March 31, 1996. This 40% increase
directly resulted from the increased performing loan portfolio, as well as the
effects of earning additional servicing fees of between 1% to 2.6% per annum on
longer maturity loans.
Loans in the aggregate principal amount of $10,409,734 were originated during
the nine months ended March 31, 1996, as compared to loans in the aggregate
principal amount of $12,908,500 for the nine months ended March 31, 1995. The
SBA guaranteed principal amount of the loans originated during the nine months
ended March 31, 1996 aggregated $8,327,867, as compared to an aggregate
guaranteed principal of $9,914,165 for the prior year's period. The guaranteed
portions of substantially all of the loans were sold in the secondary market
immediately subsequent to final disbursement. With the majority of secondary
market sales earning premium yields of 10%, Business Loan Center recorded gains
on the sale of loans of $867,545 for the nine months ended March 31, 1996, as
compared to gains of $882,935, for the nine months ended March 31, 1995. A
portion of the gross gains has been deferred for both periods in accordance with
generally accepted accounting principles.
17
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
NINE MONTHS ENDED MARCH 31, 1996
Results of Operations:
Nine Months Ended March 31, 1996 vs. Nine Months Ended March 31, 1995
(continued)
The decrease in loan origination activities, thus, the decline in gains on the
sale of loans in the secondary market and the relative decrease in net income
for the nine months ended March 31, 1996 directly resulted from the effects of
the federal budget impasse, temporary SBA administrative actions, and the
temporary government furlough during the later months of 1995. Additionally, as
a result of the pooling of interests with respect to the acquisition of
Southeastern First Financial Network, Inc., the Company restated its financial
statements. Due to the restatement, expenses increased by approximately $204,000
from that which was previously reported for the six months ended December 31,
1995.
The governmental shutdown, resulting from the budget impasse, negatively
impacted Business Loan Center's lending activities as new loan applications
could not be processed by the SBA and approved but modified loans could not be
closed, and therefore, could not be sold on the secondary market. Furthermore,
from January 1, 1995 through October 12, 1995, the SBA administratively limited
the maximum loan size of the 7(a) Loan Program to $500,000 from its original
$1,000,000 size limit and temporarily eliminated the eligibility of refinancing
of existing debt under the 7(a) Program. As a result of this administrative
enactment, loan origination activities declined for those referenced periods,
hence creating a significant backlog in the loan process. This backlog was only
further compounded as a result of the federal budget impasse.
On February 5, 1996, the Company, through its wholly-owned subsidiary, BLC
Financial Network, Inc., acquired all of the issued and outstanding common stock
of Southeastern First Financial Network, Inc in exchange for 1,808,821 shares of
the Company's common stock. This transaction resulted in a pooling of interest
and a restatement of financial statements to reflect the combined operations of
these entities, effective April 1995, when Southeastern First Financial Network,
Inc. commenced operations.
Operating expenses of the Company for the nine months ended March 31, 1996
increased by 33% over the prior year's period due to the additional overhead
costs, including salaries and commission expenditures, associated with the
acquisition of Southeastern First Financial Network, Inc. and the continued
operations of BLC Financial Network, Inc.
General and administrative expenses for the nine months ended March 31, 1996
increased substantially from the nine months ended March 31, 1995, as a result
of increased expenditures associated with the acquisition of Southeastern First
Financial Network, Inc.
18
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
NINE MONTHS ENDED MARCH 31, 1996
Results of Operations:
Nine Months Ended March 31, 1996 vs. Nine Months Ended March 31, 1995
(continued)
Interest expense increased during the nine months ended March 31, 1996 as
compared to the prior year's period, as Business Loan Center's borrowings under
its bank line and through affiliated sources increased from the prior year's
period to fund the continued growth in the loan portfolio.
19
<PAGE>
BLC FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED MARCH 31, 1996
Liquidity and Capital Resources
By actively engaging in commercial lending, the Company has a constant need for
debt financing. Cash used to fund loans, repay existing debt, and fund
operations is currently provided by loan collections, loan sales, and short and
long-term borrowings.
The Company currently maintains a dual purpose $10,000,000 bank line with a New
York Bank which provides financing of both the guaranteed and unguaranteed
portions for loans made and to be made by the Company. The line provides two
separate facilities that included a $2.5 million warehouse line to fund the
guaranteed portion of new loans at an interest rate equal to 2.75% above the
prime rate, and a credit line to fund approximately 50% of the unguaranteed
portion of new loans at an interest rate equal to 3% above the prime rate.
Borrowings under the guaranteed line are repaid immediately upon the sale of the
guaranteed portion on the secondary market.
Additionally, on March 18, 1996, the Company issued 3,703,704 shares of its
common stock for $1,000,000 in a private placement transaction.
Based upon the existing Bank line, along with the anticipated increase in sale
proceeds resulting from increased origination activities, the cash generated
from the existing portfolio in the form of interest and servicing income, and
the regular principal repayments on loan receivables, the Company believes that
its current capital resources and future cash flows will be sufficient to meet
its future financial obligations and projected capital requirements.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None
b. The Company filed Form 8-K on February 15, 1996 and Form 8-K-A
on April 16, 1996. The information reported in the above filings
related to the acquisition of all of the issued and outstanding
common stock of Southeastern First Financial Network, Inc. The
following pro forma financial information was reported in the
form: the pro forma combined consolidated balance sheet of BLC
Financial Services, Inc. and Southeastern First Financial
Network, Inc. as of December 31, 1995, the pro forma combined
consolidated income statement for the year ended June 30, 1995,
and the pro forma combined and consolidated income statement for
the six months ended December 31, 1995.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLC Financial Services, Inc.
Date: May 13, 1996 By:/s/Robert F. Tannenhauser
---------------------------------
Robert F. Tannenhauser,
President and Chief
Financial Officer
22
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