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 March 31, 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-1201
(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 March 31, 1997
No exhibits included.
<PAGE>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1997 1997
ASSETS
Current assets:
Cash and equivalents $ 3,901 $ 34,139
Other receivables 17,599 11,088
Receivable related party 303,098 303,098
Marketable securities 658,950 601,066
Other current assets 17,808 13,167
Total current assets 1,001,356 1,022,558
Investments(1) 4,041,017 8,165,123
Note receivable(2) 250,000 250,000
Investment in Affiliate -- --
Property and equipment, net 37,029 38,829
Total assets $ 5,329,402 $ 9,476,510
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Checks drawn excess of bank funds $ 288,031 $ 196,826
Accounts payable - Trade(4) 84,544 46,034
Accounts payable - Affiliate -- --
Accrued payroll - Officers/Directors Fees(3) 204,223 54,223
Other accrued liabilities 1,259 --
Total Current Liabilities $ 578,057 $ 297,083
Shareholders' equity:
Class A Preferred Stock 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 12,134,685 12,133,685
Accumulated (deficit) (7,464,829) (3,110,258)
Translation adjustment 81,489 155,000
Total shareholders' equity 4,751,345 9,179,427
Total Liabilities and Equity $ 5,329,402 $ 9,476,520
The accompanying notes are an integral part of these financial statements
2
<PAGE>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1996
1997 1996
Revenues:
Commissions and consulting fees $ -- $ 33,663
Total revenues $ -- $ 33,663
General and administrative expenses(5) $ 334,888 $ 380,899
(Loss from operations) (334,888) (347,236)
Other income (expense):
Unrealized gain (loss) on marketable
securities portfolio (2,116) --
Interest income 13,980 11,350
Writedown of Pemp/Guychar Investments(1) (4,016,830) --
Foreign currency transaction gain (loss) (619) 83,836
Total Other (Expense) (4,005,585) 95,186
Gain (loss) continuing operations (4,340,473) (252,050)
Discontinued operations (loss) (14,098) (16,721)
Net income (loss) $ (4,354,571) $ (268,771)
Per share information
Net (loss) per share $ (1.2828) $ (0.2578)
Weighted average number of
common stock shares outstanding 3,394,668 1,042,615
The accompanying notes are an integral part of these financial statements
3
<PAGE>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
1997 1996
Cash flows from operating activities:
Net income (loss) $ (4,354,571) $ (268,771)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,800 1,226
Unrealized (gain) loss/marketable securities 2,116 --
Foreign currency transaction (gain) loss 619 10,113
(Increase) decrease in assets:
Other receivables (6,511) (5,433)
Marketable securities 20,034 (84,005)
Other current assets (4,641) (7,974)
Investments - long term securities 89,347 10,113
Investment in affiliate -- (143,279)
Property/equipment/leasehold improvements -- 5,475
Writedown Pemp/Guychar Investments(1) 4,016,820 --
Increase (decrease) in liabilities:
Checks drawn excess of bank funds 91,205 --
Accounts payable/trade 38,110 (11,217)
Accounts payable/affiliate -- 160,000
Accrued payroll - Officers/ Directors Fees(3) 150,000 --
Other accrued liabilities 1,259 --
Net cash (used in) operating activities$ 45,597 $ (333,752)
Cash flows from financing activities:
Proceeds from issuance of common stock $ -- $ 54,000
Net cash provided by financing activities -- 54,000
Effect of exchange rate due to changes on cash $ (75,835) $ (109,272)
Increase (decrease) in cash and equivalents $ (30,238) $ (389,024)
Cash and equivalents - beginning of period $ 34,139 $ 1,390,961
Cash and equivalents - end of period $ 3,901 $ 1,001,937
The accompanying notes are an integral part of these financial statements
4
<PAGE>
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED FINANCIAL NOTES
PERIOD ENDING THREE MONTHS MARCH 31, 1997
ITEM 1.
The condensed consolidated financial statements of Development Bancorp,
Ltd., included herein, have been prepared without audit pursuant to the rules
and regulations of the Securities and Exchange Commission. Although certain
information normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted,
Development Bancorp, Ltd., believes that the disclosures are adequate to make
the information presented not misleading. The condensed financial statements for
the three months ended March 31, 1997 should be read in conjunction with the
financial statements and notes thereto included in Development Bancorp, Ltd.'s
annual report on Form 10-K for the fiscal year ended December 31, 1996.
The condensed consolidated financial statements included herein reflect
all normal recurring adjustments that, in the opinion of management, are
necessary for a fair presentation. The results for the interim period are not
necessarily indicative of trends or of results to be expected for a full year.
Note 1 - 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 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:
3/31/97 3/31/97 ADJUSTED
VALUE RESERVE VALUE
INVESTMENTS:
Gestion Pemp, Inc.
(1993 Purchase) $ 262,252 $ (263,252) $ 0
Pemp Network
5
<PAGE>
(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
Note 2 - 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 3 - 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 4 - 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 5 - General and Administrative Expenses
First quarter 1997 expenses of $334,888 include prior period accruals
(1996) totaling $167,834 - - (4120,000 Officers/Directors Fees and $47,834 1996
Audit Fees).
ITEM 2. Management's Discussion and Analysis
Revenues for the three months ended March 31, 1997 were $0, compared to
$33,063 for the three months ended March 31, 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 is 1997. After deducting
$167,834 in prior period adjustments (see Note 5) general and administrative
expenses were less than half of the 1996 amounts, due to the disposal of KSM
Holdings.
6
<PAGE>
Other income (Loss) in the three months ended March 31, 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 March 31, 1997 can be
recoverable at least on a liquidation basis of the Pemp affiliates.
PART II. OTHER INFORMATION
The translation adjustment amount of the three months ended March 31,
1997 was $81,439 compared to $558,327 due to 1995 year end adjustments that
appeared in the first quarter 1996 and the currency fluctuations of the Swiss
Franc.
Despite these adjustments, the Company's shareholders equity is almost
double the amount as of March 31, 1996 as a result of equity infusions.
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: November 11, 1997 By:
Dempsey K. Mork
(Chief accounting and financial officer
and duly authorized officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000915337
<NAME> DEVELOPMENT BANCORP, LTD.
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<PERIOD-END> Mar-31-1997
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<RECEIVABLES> 320,697
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