UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 

Form 10-Q

 

☒	Quarterly report under section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ______ to ______

 

Commission file number 333-71773

 

MANASOTA GROUP, INC
(Exact Name of Registrant as Specified in Its Charter)

 

Florida (State or Other Jurisdiction of Incorporation or Organization)

65-0840565 (IRS Employer Identification No.)

 

P. O. Box 14302

Bradenton, Florida 34280
(Address of Principal Executive Offices)

 

941-462-1640
(Registrant’s Telephone Number, Including Area Code)

 

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 ☐  No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporation Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232,405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐  No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act) (Check one):

 

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller reporting company	☐

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐  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 $0.01 Par Value as of June 30, 2016: Issued 1,809,912 Shares; Outstanding: 1,770,139 Shares

 

Index

 

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014(audited)	3
		Statements of Income (Unaudited) for the Nine Months ended September 30, 2015 and 2014	4
		Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2015 and 2014	5
		Notes to Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	10
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
	Item 4.	Controls and Procedures	12
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	13
	Item 1A.	Risk Factors	13
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
	Item 3.	Defaults Upon Senior Securities	13
	Item 4.	Mine Safety Disclosures	13
	Item 5.	Other Information	13
	Item 6.	Exhibits	13

 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

MANASOTA GROUP, INC.

F/K/A HORIZON BANCORPORATION, INC.

Balance Sheets

 

		September 30, 2015				December 31, 2014
		(Unaudited)				(Audited)
ASSETS
Cash		$	548,336			$	4,214
Other assets			50				50
Deferred tax asset, net			0				365,352
Discontinued operations - assets			0				1,120,573
Total Assets		$	548,386			$	1,490,189
LIABILITIES & SHAREHOLDERS’ EQIUTY/(DEFICIT)
Liabilities:
Accrued expenses		$	29,490			$	18,831
Note payable			0				1,449,609
Line of credit			0				3,000
Advances from related parties			0				50,000
Total Liabilities			29,490				1,521,440
Shareholders’ Equity/(Deficit):
Preferred stock, $.01 par value, 1,000,000 shares authorized; zero shares issued and outstanding			—				—
Common stock, $.01 par value, 25,000,000 shares authorized; 1,809,912 issued and 1,770,139 outstanding at September 30, 2015 and December 31, 2014.			18,099				18,099
Paid-in-capital			10,428,214				10,428,214
Accumulated (deficit)			(9,448,024	)			(9,998,171	)
			998,289				448,142
Less Treasury stock: 39,773 shares			(479,393	)			(479,393	)
Total Shareholders’  Equity/(Deficit)			518,896				(31,251	)
Total Liabilities and Shareholders’ (Deficit)		$	548,386			$	1,490,189

 

The accompanying notes are an integral part of these financial statements.

 

MANASOTA GROUP, INC.

F/K/A HORIZON BANCORPORATION, INC.

Statements of Income (Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Income
Other miscellaneous income			99				60				265				176
Total income			99				60				265				176
Operating Expenses
Interest expense on note			24,282				20,537				64,424				56,667
General and administrative expenses			97,925				2,732				104,137				10,365
Total operating expenses			122,207				23,269				168,561				67,032
Income (loss) from continuing operations before income taxes			(122,108	)			(23,209	)			(168,296	)			(66,856	)
Income tax provision (benefit)			(48,232	)			0				(66,477	)			0
Income (loss) from continuing operations			(73,876	)			(23,209	)			(101,819	)			(66,856	)
Discontinued operations
Income from discontinued operations - including gain from sale of property			1,032,287				29,988				1,094,487				90,747
Income tax provision (benefit)			424,271				0				442,520				0
Income from discontinued operations			608,016				29,988				651,967				90,747
Net Income		$	534,140			$	6,779			$	550,148			$	23,891
Basic and diluted net income (loss) per common share
Net income (loss) from continuing operations		$	(0.04	)		$	(0.01	)		$	(0.06	)		$	(0.04	)
Net income from discontinued operations			0.34				0.02				0.37				0.05
		$	0.30			$	0.00			$	0.31			$	0.01
Weighted average number of shares outstanding
Basic and Diluted			1,779,139				1,779,139				1,779,139				1,779,139

 

The accompanying notes are an integral part of these financial statements.

 

MANASOTA GROUP, INC.

F/K/A HORIZON BANCORPORATION, INC

Statements of Cash Flows (Unaudited)

 

		Nine Months ended September 30
		2015				2014
Net income		$	550,148			$	23,891
Less: income from discontinued operations			(651,967	)			(90,747	)
Net loss from continuing operations			(101,819	)			(66,856	)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided (used) by operating activities
Change in deferred tax asset			365,352				0
Changes in operating assets and liabilities:
Other assets			0				9,952
Accrued expenses			7,608				(25,758	)
net cash provided (used) by operating activities - continuing operations			271,141				(82,662	)
net cash provided (used) by operating activities - discontinued operations			(327,410	)			111,664
Net cash provided (used) by operating activities			(56,269	)			29,002
Cash flows from investing activities
Net cash provided by discontinued operations - Proceeds from sale of land and building			2,100,000				0
Net cash provided by investing activities			2,100,000				0
Cash flows from financing activities
Repayment on advance from related party			(50,000	)			0
Repayment of note payable			(1,446,609	)			(13,417	)
Repayment of line of credit			(3,000	)			(13,560	)
Net cash used in financing activities - continuing operations			(1,499,609	)			(26,977	)
Net increase in cash			544,122				2,025
Cash beginning of period			4,214				758
Cash end of period		$	548,336			$	2,783
Supplemental disclosure of cash flow information:
Cash paid for interest		$	64,424			$	56,667

 

The accompanying notes are an integral part of these financial statements.

 

MANASOTA GROUP, INC.

F/K/A HORIZON BANCORPORATION, INC.

 

Note 1 – Basis of Presentation

 

The financial information for MANASOTA GROUP, Inc. f/k/a HORIZON BANCORPORATION, Inc, Bradenton, Florida (the “Company”) as of September 30, 2015 and for the nine and three months ended September 30, 2015 and 2014 is unaudited but includes all adjustments, which, in the opinion of management are necessary in order to make the financial statements not misleading at such dates and for those periods. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and ,therefore, do not include all information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10K for the year ended December 31, 2014. Operating results for the nine and three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the entire year.

 

Note 2 - Organization and Summary of Significant Accounting Policies

 

MANASOTA GROUP, Inc. f/k/a HORIZON BANCORPORATION, Inc, Bradenton, Florida (the “Company” or “we”) was a one-bank holding company with respect to Horizon Bank, Bradenton, Florida (the “Bank”).  The Company commenced banking operations on October 25, 1999 when the Bank opened for business.  On September 10, 2010, the Company ceased to be a bank holding company when the Florida Office of Financial Regulation (the “OFR”) closed the Bank and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed as receiver. The FDIC sold the Bank to the Bank of the Ozarks. The Bank was primarily engaged in the business of obtaining deposits and providing commercial, consumer, and real estate loans to the general public.  Bank deposits were each insured up to $250,000 by the FDIC subject to certain limitations. After September 10, 2010, the Company’s business consisted of owning, maintaining and holding for lease its sole asset, an approximately 7,000 square foot office building located at 900 53^rd Ave E, Bradenton, FL (the “Building”). The Building was leased to Bank of the Ozarks under a 3-year lease which expired on September 10, 2013. Subsequently the Building was leased to 1^st Manatee Bank in December of 2013 under a three year lease with an option to purchase. The Building was sold to 1^st Manatee Bank during the period covered by this Report.

 

The Company is authorized to issue up to 25.0 million shares of its $.01 par value per share common stock.  Each share is entitled to one vote and shareholders have no preemptive or conversion rights.  As of September 30, 2015 and December 31, 2014, there were 1,809,912 shares Company’s common stock issued outstanding, 39,773 shares of which were held as treasury stock.  Additionally, the Company is authorized to issue up to 1.0 million shares of its $.01 par value per share preferred stock, which may be designated by the Company’s Board, without further action by the shareholders, for any proper corporate purpose with preferences, voting powers, conversion rights, qualifications, special or relative rights and privileges which could adversely affect the voting power or other rights of shareholders of common stock.   As of September 30, 2015 and December 31, 2014, there was no designated preferred stock and no shares issued or outstanding.

 

Use of Estimates.  The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

 

Concentration of Credit Risk. Cash is maintained at a major financial institution and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on the accounts. As of September 30, 2015, all non-interest bearing checking accounts were FDIC insured to a limit of $250,000. The Company did not have any interest-bearing accounts at September 30, 2015 or December 31, 2014, respectively.

 

Property. The Company’s property consists of land, the Building and building improvements, and is stated at cost. The straight-line method is used in computing depreciation over the estimated useful lives of the building and improvements of 10 to 40 years. Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the current earnings.

 

The Company follows the provisions of FASB ASC Topic 360, Property, Plant and Equipment, which establishes accounting standards for the impairment of long-lived assets such as property and equipment. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying amount, the asset is considered to be impaired. An impairment loss is recognized when management’s estimate of fair value, through outside consultation or internal assessment of value is less than its carrying amount. There were no impairment charges for the periods ended September 30, 2015 and December 31, 2014 related to these long-lived assets.

 

Income Taxes. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or the entire deferred tax asset will not be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company is no longer subject to examination by U.S. taxing authorities for years prior to 2010.

 

Sales Taxes. Amounts collected on behalf of governmental authorities for sales taxes and other similar taxes are reported on a net basis.

 

Revenue Recognition. The Company recognizes its rental revenues based on the terms on its signed lease with tenant on a straight-line basis.

 

Earnings Per Share.  Basic earnings per share are determined by dividing net income by the weighted-average number of common shares outstanding.  Diluted income per share is determined by dividing net income by the weighted average number of common shares outstanding increased by the number of common shares that would be issued assuming exercise of stock options.  This also assumes that only options with an exercise price below the existing market price will be exercised.  In computing net income per share, the Company uses the treasury stock method.

 

Reclassification. Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

 

Subsequent Events. Management has evaluated subsequent events through October 7, 2016, the date the financial statements were issued.

 

Note 3 – Recently Issued Accounting Pronouncements

 

The Company’s management does not believe that any recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) will have a material impact on the Company’s financial statements.

 

Note 4 – Going Concern

 

The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.

 

The Company sold its significant operating asset and has had no operating activity subsequent to September 29, 2015. There are no assurances that the Company will be able. in the next twelve months, to either (1) consummate a business combination transaction with a privately-owned business seeking to become a public company and, if successful in such consummation, achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) otherwise obtain additional financing through either private placements, public offerings and/or bank financing necessary to support the Company’s current working capital requirements and to retire existing liabilities and obligations, if any, on a timely basis.  To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient to support the Company, the Company will have to raise additional working capital.  No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.

 

If, during the next twelve months, a business combination is not consummated and no additional operating capital is received, the Company will be forced to rely on existing cash on hand and upon additional funds loaned by management and/or significant stockholders to preserve the integrity of the corporate entity.  In the event, the Company is unable to acquire advances from management and/or significant stockholders, who have no legal obligation to provide any further funding, the Company may not continue its operations.

 

Note 5 – Discontinued Operations and Gain on Sale of Property

 

On September 29, 2015, the Company completed the sale of a building and land to the lessee for a total sale price of $2,100,000. The Company recognized a gain on the sale of approximately $1.0 million. At the time of the sale, the Company paid off the principal balance of the mortgage note secured by the property and accrued interest totaling approximately $1,432,000.

 

Discontinued operations - assets consisted of the following:

 

		September 30, 2015				December 31, 2014
Land		$	0			$	395,035
Building & building improvements			0				1,104,951
Property, gross			0				1,499,986
Deduct:
Accumulated depreciation			0				(379,413	)
Property, net		$	0			$	1,120,573

 

The building served as collateral on the note disclosed in note 4.

 

Depreciation expense for each of the years ended December 31, 2015 and 2014 amounted to $20,917 and $27,889, respectively.

 

The pre-tax gain on sale of property was calculated as follows:

 

Land		$	395,035
Building & building improvements			1,104,951
Property, gross			1,499,986
Deduct:
Accumulated depreciation at September 29, 2015			(400,330	)
Property, net		$	1,099,656
Proceeds from sale of land and building		$	2,100,000
Deduct Property, net			1,099,656
Gain on sale		$	1,000,344

 

Costs associated with the sale were approximately $97,000.

 

The components of the income from discontinued operations consisted of the following for the years ended December 31:

 

		2015				2014
Rental income		$	115,059			$	111,664
Gain on sale of land and building			1,000,344				0
Depreciation			(20,917	)			(20,917	)
Net income from discontinued operations		$	1,094,486			$	90,747

 

Note 6 – Payoff of Note

 

On September 29, 2015, the Company completed the sale of the Building and land to the lessee for a total sale price of $2,100,000. At the time of the sale, the Company paid off the principal balance of the mortgage note secured by the property and accrued interest totaling approximately $1,432,000.

 

Note 7 – Provision for Federal & State Income Taxes

 

The sale of the land and building business resulted in the recognition of a taxable gain of approximately $1.0 million. As of September 30, 2015, the Company the gain was offset by prior year NOL’s. The Company is currently unable to reasonably estimate the impact of any additional losses that may occur during the remainder of its year ending June 30, 2015. As of September 30, 2015, the net federal and state tax impact of the gain (net of the losses incurred during the nine months ended September 30, 2015,and NOL carryovers from prior years) is approximately $62,000, which is related to the Alternative Minimum Tax (“AMT”) incurred in the amount of $11,000 and current state tax expense of $51,000.

 

For the nine months ended September 30, 2015 and 2014, the Company’s effective tax rate differed from the federal statutory rate of 35%, primarily due to state taxes and AMT .

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  As of September 30, 2015, based upon the levels of historical taxable income and projections of future taxable income over which the deferred tax assets are deductible, the Company believes that it is more likely than not that it will not be able to realize the benefits of these deductible differences.  Accordingly, a valuation allowance of approximately $4,145,000 has been provided in the accompanying financial statements as of September 30, 2015.

 

Note 8 – Subsequent Events

 

In October 2015, the Board of Directors declared a dividend of $0.27 per share totaling approximately $490,000. The dividend was paid in November 2015.

 

Effective March 21, 2016, we issued 2,000,000 shares of the Company’s Common Stock, $.01 par value, to each of four existing shareholders for the purchase price of $.01 per share. The total consideration received by the Company was $20,000 in cash.

 

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Except as required by federal securities laws, we undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report.

 

Item 2: Management’s Discussion and Analysis of Financial Condition and Operations.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included in this report. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview.

 

The Registrant was incorporated in the State of Florida on May 27, 1998, for the purpose of becoming a bank holding company owning all of the outstanding capital stock of Horizon Bank, a commercial bank chartered under the laws of Florida and a member of the Federal Reserve System (the “Bank”). The Bank opened for business on October 25, 1999.

 

As previously reported, during October 25, 1999 through September 10, 2010, the Company acted as a one-bank holding company with respect to the Bank. On September 10, 2010, due to significant losses incurred by the Bank during 2008-2010, the Florida Office of Financial Regulation (the “OFR”) declared the Bank to be “imminently insolvent.” The Bank was closed, with the Federal Deposit Insurance Corporation (the “FDIC”) being appointed as receiver therefor, and sold to Bank of the Ozarks.

 

Pursuant to a settlement agreement with the FDIC and a three-year lease (the “Initial Building Lease”), both entered into July 11, 2011, but effective September 11, 2010, we have owned, maintained and held for rent the Building under a lease to Bank of the Ozarks for the last two years. On September 6, 2013, we entered into a new three-year lease with 1^st Manatee Bank (the “New Lease”). 1^st Manatee Bank intended to operate a branch at the Building, its establishment of the branch being subject to approval by the FDIC and the OFR. 1^st Manatee filed an application for regulatory approval on October 6, 2013, and received such approval as of December 6, 2013. Under the New Lease, the initial three-year term, and the tenant’s obligation to pay rent, began December 6, 2013. 1^st Manatee retroactively made its December rent payment in January 2014.

 

The Building was sold on September 29, 2015, for a gross purchase price of $2.1 million. Using the approximately $538,000 in net proceeds from the sale of the Building, we (a) declared and paid, on November 2, 2015, a cash dividend of $0.27 per share of Common Stock for a total of approximately $490,000 and (b) repaid $40,000 in advances owed to certain current and former of our directors and all other outstanding accounts payable. As a result, we began fiscal year 2016 with approximately $47,000 in cash.

 

Subsequent to September 30, 2015, as of the date of this Report, the following event is hereby reported:

 

·

Effective March 21, 2016, we sold 2,000,000 shares of Common Stock to three members of our Board of Directors (Charles S. Conoley, M. Shannon Glasgow and Barclay Kirkland, D.D.S.) and Daniel D. Dinur, for the purchase price of $.01 per share in a private placement. We intend to use the proceeds from such sale, as well as any remaining proceeds from the sale of the Building, to defray the costs of restoring the Company’s compliance with the reporting requirements under the Exchange Act.

 

In the wake of the Company’s sale of the Building and the subsequent distribution of the special dividend, management began to consider the future of the Company as a viable entity. In early March 2016, management decided that it would not be in the best interest of the Company and its shareholders to cease all operations and allow the Company to become defunct, similar to the overwhelming majority of the other community bank holding companies which lost their bank subsidiaries in the Great Recession. Instead, the conclusion was reached that the Company could serve as the surviving entity in a merger or other combination with an operating company, the management of which was desirous of attaining public company status for the operating company. Such combination with the right operating company would, management believed, give our shareholders a chance to recover at least some portion of their original investment in the Company by participating in the future financial results of the chosen operating company.

 

Because any such operating company would by definition require that, at the time of the merger, the Company is a fully-reporting public company, management resolved to undertake the effort and the expense of restoring the Company’s compliance with its reporting obligations under the Exchange Act. In the absence of cash on hand or borrowing capacity to defray the cost of such restoration, the Board of Directors inquired whether any of its members would be willing to take the risk of investing in the Company cash sufficient to effect such restoration and to keep the Company compliant through fiscal 2016, there being no assurance that the Company would be able to find the right operating company and complete a merger during 2016. Three of the members of the Board of Directors, and Daniel D. Dinur, the Company’s outside corporate counsel, did then, in March 2016, invest $20,000 in the Company by purchasing shares of Common Stock at a purchase per share which exceeded the then trading price of such stock by over 200%. Mr. Conoley also agreed to continue to serve as our President and CEO without compensation through the end of 2016.

 

As of the date of this Report, management is continuing in its efforts to identify a potential merger partner whose prospects for growth and other attributes would give our shareholders the optimal chance for recovering, over time, some portion of their original investment in the Company. There is no assurance that we will identify the appropriate operating company, negotiate a fair merger deal and consummate the transaction in the near future.

 

Results of Operations.

 

Overall Net Income.

 

The Company reported net income of $550,148 for the nine months ended September 30, 2015, compared to net income of $23,891 for the nine months ended September 30, 2014. In each period, net income was the result of income from discontinued operations (mainly a gain from the sale of the Building) plus minimal other miscellaneous income -- $1,094,847 plus $265 and $90,747 plus $176, respectively -- being offset by a loss from operations plus the write-off of the deferred tax asset -- $101,819 plus $442,520 and $66,856 plus $0, respectively. Basic and diluted gains per share for the nine months ended September 30, 2015 were $0.31. Basic and diluted losses per share were $0.01 for the nine months ended September 30, 2014.

 

The Company reported net income of $534,140 for the three months ended September 30, 2015, compared to net income of $6,779 for the three months ended September 30, 2014. Similarly to the nine-month results, in each period, net income was the result of income from discontinued operations plus minimal other miscellaneous income -- $1,032,287 plus $99 and $29,888 plus $60, respectively -- being offset by a loss from operations plus write-off of the deferred tax asset -- $73,876 plus $424,271 and $23,909 plus $0, respectively. Basic and diluted gains per share for the three months ended September 30, 2015 were $0.30. Basic and diluted earnings per share were negligible for the three months ended September 30, 2014.

 

Total Assets.

 

As of September 30, 2015, total assets of the Company were $548,336 compared to $1,490,189 at December 31, 2014, a decrease of $941,803. This decrease is primarily due to the sale of the Building on September 29, 2015 and the write off of the deferred tax asset.

 

Liquidity & Capital Resources

 

As of September 30, 2015, we had a working capital excess of $518,396. We realized net income of $550,148 for the nine months ended September 30, 2015, compared to net income of $23,891 for the nine months ended September 30, 2014.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (Principal Financial Officer) as appropriate, to allow timely decisions regarding required disclosure. Within the 90 days preceding the filing of this Report, we carried out an evaluation, under the supervision and with the participation of our management, including the Principal Executive Officer and the Acting Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act. Based on this evaluation, because of lack of segregation of duties attributable to limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of September 30, 2015.

 

Limitations on Effectiveness of Controls and Procedures.

 

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Controls.

 

There have been no changes in the Company’s internal control over financial reporting during the third quarter of 2015 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

Part II. Other Information

 

Item 1. Legal Proceedings.

 

There have been no material changes to the pending legal proceedings to which the Company or the Bank is a party since the filing of the Registrant’s Form 10-K for the year ended December 31, 2014.

 

Item 1A.  Risk Factors.

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

Not Applicable

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

31.1	Certification of Chief Executive Officer
31.2	Certification of Acting Chief Financial Officer
32.1	Certification  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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.

 

	/s/ Charles S. Conoley
	Charles S. Conoley
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Kathleen M. Jepson
	Kathleen M. Jepson
	Acting Chief Financial Officer
	(Principal Financial and Accounting Officer)

 

Date: October 7, 2016