SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________________
to
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Commission File Number 0-22934
DEVELOPMENT BANCORP, LTD.
(Exact Name of Small Business Issuer as specified in its Charter)
Washington 91-1268870
(State or other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification No.)
14 Quai du Seujet, Geneva, Switzerland CH-1301
(Address of principal executive offices) (Zip Code)
(011) 4122-9081598
(Issuer's telephone number)
Check whether the Issuer (1) 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 Equity, as of the latest practicable date.
Common Stock, no par value 3,394,668
Title of Class Number of Shares outstanding
at September 30, 1997
No exhibits included.
<PAGE>
<TABLE>
<CAPTION>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
1997 1996
Current Assets:
<S> <C> <C>
Cash and Equivalents $ 8,610 $ 34,139
Other Receivables 17,694 11,088
Receivable Related Party 104,115 303,098
Marketable Securities 643,939 601,066
Other Current Assets 17,808 13,167
Total current Assets 792,166 1,022,558
Investments(1) 5,172,381 8,165,123
Note Receivable(2) 250,000 250,000
Investment in Affiliate -- --
Property and equipment, net 33,429 38,829
Total assets $ 6,247,976 $ 9,476,510
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Checks drawn excess of bank funds $ 328,369 $ 196,826
Accounts Payable - Trade(4) 46,400 46,034
Accounts Payable Affiliate -- --
Accrued Payroll(3) 264,223 54,223
Other Accrued Liabilities 7,286 --
Total current liabilities $ 640,278 $ 297,083
Shareholders' equity:
Class A convertible preferred stock, no par
value; 1,500 and 1,000 shares, issued
and outstanding 1,500 1,000
Common stock, no par value; 50,000,000
shares authorized; 3,394,668 and 1,044,923
shares issued and outstanding, respectively 12,133,185 12,133,685
Accumulated (deficit) (6,576,083) (3,110,258)
Translation adjustment 49,096 155,000
Total shareholders' equity 5,607,698 9,179,427
Total liabilities and equity $ 6,247,976 $ 9,476,520
</TABLE>
The accompanying selected information is an integral part of
the financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Month and Nine Month Periods Ended September 30, 1997 and 1996
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
Revenues:
<S> <C> <C> <C> <C>
Commission, Consulting Fees (Net) $ 27,253 $ 13,489 $ 27,253 $ 89,755
Dividends Income -- -- 543 --
Total Revenues 27,253 13,489 27,796 89,755
General and administrative expenses 151,569 241,767 635,372 845,274
Income (Loss) from operations (124,316) (228,278) (607,576) (755,519)
Other income (expense):
Gain (loss) on sales of securities -- 385,861 -- 385,861
Unrealized gain (loss) on marketable
securities portfolio -- (473) (2,116) (473)
Interest Income 19,318 12,970 43,402 36,522
(Writedown) Pemp/Guychar Investments -- -- (2,884,818) --
Foreign currency transaction gain (loss) -- 8,704 (619) 151,285
Total Other Income 19,318 407,062 (2,844,151) 573,195
Income (loss) continuing operations (104,998) 178,784 (3,451,727) (182,324)
Discontinued Operations Income (Loss) -- (300,579) (14,098) (219,678)
Net income (loss) $ (104,998) $ (121,795) $(3,465,825) $ (402,002)
Per share information:
Net (loss) per $ (0.0309) $ (0.1166) $ (1.0209) $ (0.3850)
Weighted average number of
common stock shares outstanding 3,394,668 1,044,923 3,394,668 1,044,120
</TABLE>
The accompanying selected information is an integral part of the financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
DEVELOPMENT BANC0RP, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Month and Nine Month Period Ended September 30, 1997
(Unaudited)
Three Month Nine Month
September 30, September 30,
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (104,998) $ (3,465,825)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,800 5,400
Unrealized (gain) loss/marketable securities -- 2,116
Foreign currency transaction (gain) loss -- 619
(Increase) decrease in assets:
Other receivables -- (6,606)
Marketable securities -- 35,045
Other current assets -- $ (4,641)
Investments - long term securities -- 89,995
Investment in affiliate -- --
Property/equipment/leasehold improvements -- --
Writedown Pemp/Guychar Investments(1) -- 2,884,818
Receivable Related Party -- 198,983
Increase (decrease) in liabilities:
Checks drawn excess of bank funds 109,489 131,542
Accounts payable/trade (20,251) (6,034)
Accounts payable/affiliate -- --
Accrued Payroll - Officers/Directors' Fees 30,000 210,000
Other accrued liabilities 5,512 7,286
Net cash (used) in operating activities $ 21,552 $ 82,698
Cash flows from financing activities:
Proceeds from issuance of common stock -- --
Net cash provided by financing activities $ -- $ --
Effect of exchange rate due to changes on cash $ (15,463) $ (108,227)
Increase (decrease) in cash and equivalents $ 6,089 $ (25,229)
Cash and equivalents - beginning of period $ 2,521 $ 34,139
Cash and equivalents - end of period $ 8,610 $ 8,610
</TABLE>
The accompanying selected information is an integral part of the
financial statements
4
<PAGE>
DEVELOPMENT BANCORP, LTD.
SELECTED INFORMATION
For the Nine Month Period Ended September 30, 1997 and 1996
(Unaudited)
Note 1: Organization and Significant Accounting Policies
Nature of Organization:
Development Bancorp, Ltd. ("Development" or "the Company") is a
holding company
organized in the state of Washington for the purpose of providing
international investment
banking services through its majority-owned subsidiaries:
Development Corp Services Limited
(Ireland - 99.93% owned), and SFD Societe Financere De Distribution
Geneve SA (Switzerland -
99.3% owned).
Basis of Presentation:
The accompanying unaudited consolidated balance sheets as of
September 30, 1997 and the unaudited consolidated statements of
operations and cash flows for the nine month periods ended September
30, 1997, include the accounts of Development Bancorp, Ltd. and its
wholly-owned subsidiaries, Development Corp Services Limited, SFD
Societe Financiere De Distribution Geneve SA, and KSM Holding
Corporation. For the nine months ended September 30, 1995, the
consolidated financial statements include the accounts of
Development Bancorp, Ltd. and its wholly-owned subsidiaries,
Development Corp Services Limited and SFD Societe Financiere De
Distribution Geneve SA. All references to "the Company" in these
financial statements relate to the consolidated entity. All
significant intercompany accounts and transactions are eliminated in
consolidation.
These financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the
Company's financial position, the results of operations and its cash
flows for the nine months ended September 30, 1997 and 1996. The
results for the period ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997. This report should be read in conjunction with
the Financial Statements and Notes contained in the Company's Annual
Report for the year ended December 31, 1996.
Net Income (Loss) Per Share:
Income (loss) per share is calculated based on the weighted average
number of common shares outstanding as the effect of including
common stock equivalents would be anti-dilutive.
5
<PAGE>
Reclassifications:
Certain reclassifications have been made in the 1995 financial
statements in order to conform with 1996 financial statement
presentation. These reclassifications have no effect on accumulated
deficit or net loss, as originally reported.
Note 2 - Investments - Pemp/Gestion Guychar, Inc.
Riccardo Mortara has been President and Chairman of the Board of
Development Bancorp, Ltd. and President and
Chairman of the Board of Biocoral, Inc. and the Managing Director of Societe
Financiere du Seujet.
Prior to September 30, 1996, Development Bancorp, Ltd. had $884,818
invested in Gestion Pemp, Inc./Pemp Network
and Biocoral, Inc. had $600,000 invested in Gestion Pemp, Inc.
In Biocoral's September 30, 1996 10Q, Biocoral, Inc. wrote off their
$600,00 investment in Gestion Pemp, Inc. This
followed the Company's statement in August, 1996 "based on Pemp's inability to
make the dividend payments, management of
6
<PAGE>
the Company deemed the investment in Pemp to be worthless and it was written off
in its entirety in 1996."
In November, 1996, Development Bancorp, Ltd. invested $3,132,012 in
Preferred Gestion Guychar, Inc. which increased its investment in the
organization from $884,818 to $4,016,830. Societe Financiere du Seujet made the
investment in the preferred shares of Gestion Guychar/Pemp on behalf of
Development Bancorp, Ltd. The terms and the conditions of this investment were
not written and Development Bancorp, Ltd. has been unable to obtain any
financial records. Therefore, the management of Development Bancorp, Ltd.,
supported by the recommendations of its attorneys and auditors, have elected to
provided a Writeoff Reserve of $2,884,818 against the $4,016,830 Total Pemp
Investment as follows:
<TABLE>
<CAPTION>
3/31/97 3/31/97 ADJUSTED
VALUE RESERVE VALUE
INVESTMENTS:
Gestion Pemp, Inc.
<S> <C> <C> <C>
(1993 Purchase) $ 262,252 $ (263,252) $ 0
Pemp Network
(1993 Purchase) 621,566 (621,566) 0
Sub Total $ 884,818 $ (884,818) $ 0
Preferred Gestion Guychar, Inc.
(Nov. 1996 Purchase) 3,132,012 (2,000,000) 1,132,012
Total Pemp Investment $ 4,016,830 $ (2,884,818) $ 1,132,012
Other Investments
SFP/Geneva Bank Stocks $ 4,041,017 $ 0 $ 4,041,017
TOTAL INVESTMENTS $ 5,173,029
</TABLE>
Note 3 - Contract Note Receivable/KSM
The KSM Holding/Miller acquisition was rescinded in late 1996. The
recision agreement (signed by Kevin Miller, owner of KSM Holding, and
Development Bancorp, Ltd.) provided for a full repayment of "all monies" advance
to KSM in connection with the Purchase Agreement and any additional amounts
advances by Development Bancorp, Ltd. to KSM, its employees or to Global Finance
or its employees. The amount of these items approximate $1.3 million. As part of
the year end audit at 12/31/96, the company auditors set up $250,000 as a
Contract Note Receivable. Development Bancorp, ltd. is currently preparing its
Litigation Case to recover the full amount.
Note 4 - Accrued Payroll Officers/Directors Fees
The 1996 accrual of $120,000 was not made by the auditors as part of
the 1996 year end audit. This was booked as an accrual at 3/31/97 along with the
1st quarter 1997 accrual for $30,000. The remaining $54,223 is applicable to the
1995 accrual balance.
Note 5 - Accounts Payable - Trade
Included in the Liability Account are the 1996 audit fees for the 10Q's
amounting to $19,615 and $28,219 for the 10K. These were not accrued by the
auditors as part of the 1996 year end audit.
Note 6 - General and Administrative Expenses
First quarter 1997 expenses of $334,888 include prior period accruals
(1996) totaling $167,834 -- ($120,000 Officers/Directors Fees and $47,834 1996
Audit Fees).
7
<PAGE>
ITEM 2. Management's Discussion and Analysis
Revenues for the three and nine months ended September 30, 1997 were
$27,253 and $27,796, compared to $13,489 and $89,755 for the three and nine
months ended September 30, 1997. 1996 revenues were derived primarily from
commissions from the Company's
interest in Pemp Gestion Network, which experienced a downturn in its business
in calendar 1996. General and administrative expenses were significantly less in
1997. After deducting $167,834 in prior period adjustments (see Note 5) general
and administrative expenses were similar to 1996 amounts, due to a reduction
from the disposal of KSM Holdings, offset by expenses of investigating
additional investment opportunities.
Other income (Loss) in the three and nine months ended September 30,
1997 was
significantly higher due to a writedown in the Company's investment in Pemp and
its related companies. By fiscal 1997 the Company determined that it should
write of $2,884,818 of its $4,016,836 investment in Pemp and its affiliates.
This writedown was made because management was unable to obtain financial
records of these companies to support the valuation at cost, the lack of
documentation for the Company's 1996 investment in Preferred Stock of Gestion,
Gychor, Inc. and the consequent inability of the Company to evaluate the future
benefits of the investment in the Pemp affiliates as operating companies. The
company is negotiating with the investees to document the Company's interests
and to provide assurances that the amounts booked as of September 30, 1997
can be
recoverable at least on a liquidation basis of the Pemp affiliates.
6
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
7
<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.
Date: December 10, 1997 By: /s/ Dempsey K. Mork
Dempsey K. Mork
(Chief accounting and financial officer
and duly authorized officer)
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND AS
OF SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000915337
<NAME> DEVELOPMENT BANCORP, LTD.
<MULTIPLIER> 1
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jul-01-1997
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1
<CASH> 8,610
<SECURITIES> 643,939
<RECEIVABLES> 121,809
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 792,166
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,247,976
<CURRENT-LIABILITIES> 640,778
<BONDS> 0
0
1,500
<COMMON> 12,133,685
<OTHER-SE> (2,955,258)
<TOTAL-LIABILITY-AND-EQUITY> 6,247,976
<SALES> 0
<TOTAL-REVENUES> 27,253
<CGS> 0
<TOTAL-COSTS> 845,274
<OTHER-EXPENSES> (2,844,151)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,465,825)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,465,825)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,465,825)
<EPS-PRIMARY> (1.02)
<EPS-DILUTED> (1.02)
</TABLE>
