Shared Capital Cooperative 1SA Semiannual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-SA

☒ SEMIANNUAL REPORT PURSUANT TO REGULATION A

☐ SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A

For the ﬁscal semiannual period ended June 30, 2024

SHARED CAPITAL COOPERATIVE

(Exact name of issuer as speciﬁed in its charter)

Minnesota		41-1621896
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification Number)

2388 University Ave W, Suite 300, St. Paul, Minnesota 55114

(Full mailing address of principal executive ofﬁces)

612-767-2100

(Issuer’s telephone number, including area code)

Item 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this section in conjunction with (i) Shared Capital’s financial statements and (ii) the section entitled “Description of Shared Capital’s Business,” in Form 1-A, Part II, Item 7.

The discussion contains forward-looking statements relating to our plans and expectations for future operations. Forward-looking statements may be based on assumptions, and reaching any predicted result is uncertain and involves risk. Shared Capital’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under “Risk Factors” and elsewhere in Form 1-A.

Financial Performance

Shared Capital is a growing loan fund with healthy financials and a steadily growing loan portfolio. In the five years leading up to June 2024, Shared Capital’s assets grew from $13.8 million to $24.9 million. Interest and fee income increased 85% between 2019 and 2023.

The year-over-year gross profit from lending activities increased by 5.0% in 2020, 5.8% in 2021, 11.1% in 2022, and 50.1% in 2023. Contributed revenue from grants and donations have also increased over time, growing from under $100,000 per year before 2018 (by average), to averaging over $1.8 million over the past four years.

Operating Results

Increases in gross profit have been driven primarily by growth in annual lending volume (both in number of loans and average loan amount), resulting in greater outstanding loans receivable and higher earned revenue from interest and fees.

Major Capital and Funding Sources

Shared Capital has raised $5,391,000 in new capital from 122 investors through this national Direct Public Offering (opening on October 28, 2021), with $3,357,000 from issuance of Notes and $2,034,000 from the sale of Shares.

The CDFI Fund of the US Department of Treasury is one of the Cooperative’s largest funders. The CDFI Fund offers competitive annual funding opportunities, and Shared Capital has received multiple CDFI Fund awards in recent years. In 2021, Shared Capital was awarded a grant of $1,826,265 through the CDFI Fund’s special Rapid Response Program (RRP) to support business recovery from the COVID-19 pandemic. We received grant awards from the CDFI Fund Financial Assistance program of $520,000 in 2020 and $565,000 in 2019. In addition, in 2020, we received a $1,050,000 grant award from the CDFI Fund Health Food Financing Initiative (HFFI).

We anticipate continued funding from the CDFI Fund, but we do not expect to receive CDFI Fund funding every year. The awards from the CDFI Fund are highly competitive, with more than 700 CDFIs vying for funding, and the amounts of potential awards depend on funding levels set by Congress. Most awards require a dollar-for-dollar match of the same type (i.e. grant, debt, or equity) and depend on Shared Capital’s financial and programmatic performance and the strength of our funding proposals. Our access to funding from the CDFI Fund depends on our compliance with prior funding awards agreements, maintaining CDFI certification, and continued deployment of funds to economically disadvantaged communities in alignment with CDFI guidelines. These awards do not substantially fund operations – they are primarily used for lending capital.

In 2019, Shared Capital received a one-time $5 million multi-year award from the New World Foundation through its Quality Jobs Fund. The award supports Accelerate Employee Ownership, which is a collaborative program with national nonprofit Project Equity. The program seeks to expand employee ownership and create and sustain high quality jobs in local communities. The award supports assistance and financing to employees to purchase the business.

Liquidity and Capital Resources

Shared Capital’s cash and near-cash assets grew significantly between 2020 to 2022 due to increased governmental and private grants and investments, particularly in response to the economic hardships of the COVID-19 pandemic. By year-end 2023, our cash position returned to 2020 levels due to aggressive deployment of loan funds into the cooperative economy.

Annual lending grew significantly during 2022 and 2023, with $7.4 million in loans closed in 2022 and over $13.2 million in loans closed in 2023. Lending activity slowed over the first half of 2024 due to aggressive deployment of available loan funds, but we anticipate higher cash levels by the end of 2024 and into 2025 as we raise new capital through grants and investments to keep pace with demand for loans. At this time, there are no planned capital expenditures that would deplete cash reserves.

Portfolio Risk and Loan Losses

The Cooperative has an established and successful track record of lending of almost a half century, but from time to time we have experienced loan losses due to unexpected changes in the market. For example, increased competition within retail grocery led to declining financial performance and increasing rates of failure for some food cooperatives between 2016-2019, including some Shared Capital borrowers, resulting in higher loan losses during that time. Similarly, the housing crisis led to higher failure rates of some housing cooperatives, resulting in the loss by Shared Capital of two significant loans to housing co-ops in 2008 and 2011. Likewise, economic downturn or unforeseeable market changes, including interest rate fluctuations, could potentially affect Shared Capital borrowers in affected industries or geographic areas, leading to larger-than-anticipated loan losses.

Trend Information

Over the past eight years, we have witnessed a growing interest in cooperative models as solutions to economic and racial equity challenges, and the interest intensified as a result of the COVID-19 pandemic. There are a growing number of cooperative development efforts in rural and urban communities across the country, and we expect to see more cooperatives forming and expanding, which will lead to further growth in the pipeline of projects seeking financing. Some cooperative sectors are growing, including sustainable energy. In addition, we are seeing growing interest from philanthropy, government, and private investors in investing in cooperative development and in investing through CDFIs. We expect this focused interest to provide the opportunity for continued growth in the capital available for our work over the coming years.

Grant and contribution income is never guaranteed, but future recognition of current grant awards and new potential grant opportunities that continue to emerge signal a high likelihood that grant and contribution revenue may continue to be available for the next several years, as we continue to increase our self-sufficiency and reduce our reliance on grants for operations.

Item 2. Other Information

n/a

Item 3. Financial Statements

Shared Capital Cooperative

Balance Sheets

June 30, 2024 and December 31, 2023 and 2022 and 2021

	30-Jun
	2024			2023			2022			2021
ASSETS
CURRENT ASSETS
Cash		3,018,741			2,908,090			6,057,325			8,444,879
Accounts Receivable		16,836			13,823			616,373			190,676
Prepaid Expenses		87,545			84,291			105,486			94,593
Accrued Interest Receivable		206,998			157,774			82,979			78,598
Current Portion of Notes Receivable		6,670,717			6,895,101			4,843,226			3,549,654
Total Current Assets		10,000,837			10,059,079			11,705,389			12,358,400

Property and Equipment - Net		7,017			12,659			25,701			28,685
Intangible Assets - Net		6,538			7,868			10,527			13,187

OTHER ASSETS
Security Deposit		3,000			3,000			3,000			3,000
Equity in Other Cooperatives		324,480			300,000			300,000			154,560
Deposit in Other Cooperatives		10,075			10,075			5,075			5,000
Notes Receivable Less Current Portion - Net of Loan Loss Allowance		14,456,545			14,942,823			10,732,349			8,245,907
Right of Use Asset		113,976			131,325			155,968
Deferred Taxes		16,000			18,000			14,000			87,000

Total Assets		24,938,468			25,484,829			22,952,009			20,895,739

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable		1,007,271			1,399,286			56,137			17,721
Accrued Expenses		846			34,302			28,125			19,508
Deferred Revenue		1,898,341			2,054,560			1,755,675			735,688
Funds Held for Others		404,750			401,827			298,913			331,039
Income Taxes Payable		-			2,510			36,188			31,020
Current Portion of Accrued Interest Payable		184,952			161,315			195,134			173,168
Current Portion of Operating Lease Liabilities		34,072			33,301			30,766
Current Portion of Long-Term Debt		3,776,225			3,318,213			2,727,428			3,368,186
Total Current Liabilities		7,306,457			7,405,314			5,128,366			4,676,330

LONG-TERM LIABILITIES
Operating Lease Liabilities Net of Current Portion		81,036			98,757			125,202
Accrued Interest Payable Net of Current Portion		151,386			177,252			167,599			150,991
Line of Credit		-			1,000,000
Long-Term Debt Net of Current Portion and Loan Costs		12,304,522			12,107,232			13,416,226			12,840,893

Total Liabilities		19,843,401			20,788,555			18,837,393			17,668,214

EQUITY
Preferred Stock, $10 Par Value, 500,000 Shares Authorized,		5,025,843			3,931,085			3,390,975			2,590,147
Common Stock - Voting, $10 Par Value, 1,000 Shares Authorized,		4,710			4,640			4,340			4,170
Common Stock - Nonvoting, $10 par Value, 500,000 Shares		1,556,451			1,556,451			1,555,901			1,557,901
Additional Paid-In Capital		692,198			682,068			659,292			657,590
Retained Patronage		98,525			98,525			99,077			82,785
Accumulated Deficit		(2,282,660	)		(1,576,495	)		(1,594,969	)		(1,665,068	)

Total Equity		5,095,067			4,696,274			4,114,616			3,227,525

Total Liabilities and Equity		24,938,468			25,484,829			22,952,009			20,895,739

Shared Capital Cooperative

Income Statements

June 30, 2024 and December 31,2023 and 2022 and 2021

	30-Jun
	2024			2023			2022			2021
REVENUE
Interest Income - Loans		727,282			1,244,654			956,637			871,207
Interest Income - Cash Accounts		15,225			65,322			42,996			13,580
Loan Fees		31,199			260,607			153,080			107,873
Loan Recovery Income		4,626			22,084			-			11,826
Grants and Contributions		157,498			2,239,101			1,365,831			2,634,706
Consulting Income		45,576			19,035			8,000			700
Other		33,553			9,000			20,202			10,000

Total Revenue		1,014,959			3,859,803			2,546,746			3,649,892

EXPENSES
Provision for Loan Losses		325,382			448,703			212,972			912,731
Personnel		567,987			1,107,023			947,969			680,657
Outside Services		114,014			171,365			145,452			419,267
Interest		208,808			378,162			358,900			303,233
Contributions		135,026			1,170,958			209,921			185,000
Professional Servies		66,561			107,377			88,661			81,558
Advertising		19,671			37,813			62,061			60,139
Occupancy		32,147			61,107			55,305			55,096
Office Supplies		11,673			57,160			32,790			34,070
Depreciation and Amortization		6,972			15,701			19,411			18,732
Seminars, Travel, Training		37,009			85,182			80,354			12,884
Fees		3,729			16,387			5,793			11,239
Dues		8,517			7,900			8,557			8,749
Board Expense		-			300			1,763			824

Total Expenses		1,537,496			3,665,138			2,229,909			2,784,179

Net Income Before Income Taxes and Patronage Dividend		(522,537	)		194,665			316,837			865,713

Provision for Income Taxes		(18,870	)		(47,981	)		(126,532	)		(417,809	)
Patronage Dividend								(17,402	)		(40,695	)

Net Income		(541,407	)		146,684			172,903			407,209

Shared Capital Cooperative

Cash Flows

June 30, 2024 and December 31,2023 and 2022 and 2021

	30-Jun
	2024			2023			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income		(541,407	)		146,684			172,903			407,209
Adjustments to Reconcile Net Income to
Net Cash Flows from Operating Activities
Depreciation and Amortization		5,642			15,701			19,411			18,732
Change in Loan Loss Allowance		325,383			5,549			212,973			544,567
Amortization of Loan Costs		1,330			5,114			2,411			887
Amortization of Operating Lease Right-of-Use Asset		17,349			24,643			32,181
Forgiveness of Notes Payable		-			(1,500,000	)
Deferred Taxes		2,000			(4,000	)		73,000			369,000
(Increase) Decrease in Assets
Accounts Receivable		(3,013	)		602,550			(425,697	)		256,101
Prepaid Expenses		(3,254	)		21,195			(10,893	)		(67,806	)
Accrued Interest Receivable		(49,224	)		(74,795	)		(4,381	)		(17,243	)
Equity Investments in Other Cooperatives (Net)		-			-			(145,440	)
Membership Equity in Other Cooperatives		-			(5,000	)		(75	)		-
Increase (Decrease) in Liabilities
Accounts Payable		(455,358	)		1,343,149			38,416			(5,002	)
Accrued Expenses		(262	)		6,177			8,617			3,564
Deferred Revenue		(156,219	)		298,885			1,019,987			635,688
Operating Lease Liabilities		(16,950	)		(23,910	)		(32,181	)
Funds Held for Others		33,072			102,914			(32,126	)		6,290
Income Taxes Payable		(2,510	)		(33,678	)		5,168			13,022
Accrued Interest Payable		(2,228	)		(24,166	)		36,607			58,716

Net Cash Flows from Operating Activities		(845,649	)		907,012			970,881			2,223,725

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Notes Receivable		2,591,391			9,314,102			2,934,807			2,890,587
Purchases of Property and Equipment		-			-			(13,767	)		(24,821	)
Issuance of Notes Receivable		(2,206,112	)		(15,582,000	)		(6,927,794	)		(2,905,813	)
Purchases of Mission Equity Investments		(24,480	)								-

Net Cash Flows from Investing Activities		360,799			(6,267,898	)		(4,006,754	)		(40,047	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit		(1,000,000	)		1,000,000
Issuance of Long-Term Debt		829,467			1,901,341			1,697,151			4,366,875
Payments on Long-Term Debt		(174,538	)		(1,113,876	)		(1,753,920	)		(1,016,281	)
Payments of Debt Issuance Costs		372			(10,788	)		(9,100	)
Purchases of Common Stock		10,200			30,965			4,572			17,280
Redemptions of Common Stock					(7,339	)		(4,700	)		(2,353	)
Purchases of Preferred Stock		930,000			411,900			698,024			14,000
Patronage Dividend Retained					-			17,402			40,695
Redemptions of Retained Patronage					(552	)		(1,110	)		-

Net Cash Flows from Financing Activities		595,501			2,211,651			648,319			3,420,216

Net Change in Cash		110,651			(3,149,235	)		(2,387,554	)		5,603,894

Cash at Beginning of Year		2,908,090			6,057,325			8,444,879			2,840,985

Cash at End of Period		3,018,741			2,908,090			6,057,325			8,444,879

SUPPLEMENTARY DISCLOSURES
Cash Paid for Interest		208,808			397,214			317,915			243,630
Cash Paid for Income Taxes		18,870			52,204			69,260			17,998
Preferred Stock Dividend		164,758			128,210			102,804			71,680

Shared Capital Cooperative

Changes in Stockholder Equity

June 30, 2024 and December 31, 2023 and 2022 and 2021

			Common			Common			Additional
	Preferred		Stock -			Stock -			Paid-In			Retained			Accumulated			Total
	Stock		Voting			Nonvoting			Capital			Patronage			Deficit			Equity

Balance December 31, 2021		2,590,147		4,170			1,557,901			657,590			82,785			(1,665,068	)		3,227,525

Purchases		698,024		170						4,402									702,596
Redemptions				(10	)					(4,690	)		(1,110	)					(5,810	)
Stock Converted				10			(2,000	)		1,990									-
Preferred Stock Dividend		102,804														(102,804	)		-
Patronage Dividend													17,402						17,402
Net Income																172,903			172,903

Balance December 31, 2022		3,390,975		4,340			1,555,901			659,292			99,077			(1,594,969	)		4,114,616

Purchases		411,900		300			25			30,640									442,865
Redemptions										(7,339	)		(552	)					(7,891	)
Stock Converted							525			(525	)								-
Preferred Stock Dividend		128,210														(128,210	)		-
Patronage Dividend																			-
Net Income																146,684			146,684

Balance December 31, 2023		3,931,085		4,640			1,556,451			682,068			98,525			(1,576,495	)		4,696,274

Purchases		930,000		70						10,130									940,200
Redemptions																			-
Stock Converted																			-
Preferred Stock Dividend		164,758														(164,758	)		-
Patronage Dividend																			-
Net Income																(541,407	)		(541,407	)

Balance June 30, 2024		5,025,843		4,710			1,556,451			692,198			98,525			(2,282,660	)		5,095,067

Item 4. Exhibits

n/a

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Shared Capital Cooperative, a Minnesota Cooperative Corporation

Signature	/s/ Christina Jennings
Name	Christina Jennings
Title	Executive Director
Date	September 25, 2024

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.

Signature	/s/ Christina Jennings
Name	Christina Jennings
Title	Executive Director
Date	September 25, 2024

Signature	/s/ Mark Downey
Name	Mark Downey
Title	Director of Finance and Operations
Date	September 25, 2024

Signature	/s/ Holly Jo Sparks
Name	Holly Jo Sparks
Title	Treasurer and Director
Date	September 25, 2024

Shared Capital Cooperative 1-SASemiannual report