FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2001
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
333-56424
The Forest Bank, LLC
(Exact name of registrant as specified in its charter)
Delaware 16-1598585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
339 East Avenue, Suite 300 716 232 3530
Rochester, NY 14604 (Registrant's telephone
(Address of principal executive offices) number, including area code)
N/A
(Former name)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 [ ]
As of November 7, 2001, there were no class A units of The Forest Bank, LLC
outstanding.
The Forest Bank, LLC
Form 10-Q
For the quarterly period ended September 30, 2001
INDEX
Page
----
Part I Financial Information
Item 1. Financial Statements...................................................2
Balance Sheet........................................................2
Statements of Operations.............................................3
Statement of Cash Flows..............................................4
Notes to Financial Statements........................................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............ .....................................9
Item 3. Qualitative and Quantitative Disclosure about Market Risks............10
Part II Other Information
Item 1. Legal Proceedings.....................................................10
Item 2. Changes in Securities.................................................10
Item 3. Defaults upon Senior Securities.......................................10
Item 4. Submission of Matters to a Vote of Security Holders...................10
Item 5. Other Information.....................................................10
Item 6. Exhibits and Reports on Form 8-K......................................10
Signatures....................................................................11
Part I
Financial Information
Item 1. Financial Statements
THE FOREST BANK, LLC
--------------------
(A Development Stage Company)
-----------------------------
BALANCE SHEET
-------------
SEPTEMBER 30, 2001
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 32,930
Cash restricted for payment to certain land owner 3,816
Certificate of deposit 260,000
-----------
296,746
OTHER ASSET
- -----------
Deferred offering costs $ 212,495
-----------
$ 509,241
===========
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
CURRENT LIABILITIES
- -------------------
Due to Nature Conservancy $ 100
-----------
TOTAL CURRENT LIABILITIES $ 100
MEMBER'S EQUITY
- ---------------
Class M membership units $ 1,250,000
Less management services receivable (712,500)
-----------
$ 537,500
Deficit accumulated in the development stage (28,359)
-----------
$ 509,141
-----------
$ 509,241
===========
See accompanying notes.
2
THE FOREST BANK, LLC
--------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
Three
January 17, 2001 months
(Inception) to ended
to September September
30, 2001 30, 2001
------------ -----------
General and administrative expenses:
Management services expenses 37,500 37,500
Other administrative expenses 100 100
Bank charges 64 --
Fees for filing 10Q 504 504
------------ -----------
NET LOSS FROM OPERATIONS $ (38,168) $ (38,104)
Other income - Interest income $ 9,809 $ 1,580
NET LOSS (28,359) (36,524)
Net loss per membership unit $ (.02) $ (.02)
============ ===========
Weighted average - Class M member units 1,500,000 1,500,000
============ ===========
See accompanying notes.
3
THE FOREST BANK, LLC
--------------------
(A Development Stage Company)
-----------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE PERIOD JANUARY 17, 2001 (INCEPTION) TO SEPTEMBER 30, 2001
- -----------------------------------------------------------------
CASH FLOWS - OPERATING ACTIVITIES
- ---------------------------------
Net loss for the period $ (28,359)
Adjustments to reconcile net loss to net cash provided from
operating activities:
Decrease in management services receivable 37,500
Changes in certain assets and liabilities affecting
operations:
Cash restricted for payment to certain landowner (3,816)
Amount due to The Nature Conservancy 100
---------
NET CASH PROVIDED FROM
OPERATING ACTIVIITIES$ 5,425
CASH FLOWS - INVESTING ACTIVITIES
- ---------------------------------
Purchase of certificate of deposit (260,000)
---------
NET CASH USED FOR
INVESTING ACTIVITIES $(260,000)
CASH FLOWS - FINANCING ACTIVITIES
- ---------------------------------
Deferred offering costs incurred and paid (212,495)
Issuance of Class M membership units 500,000
NET CASH PROVIDED FROM
FINANCING ACTIVITIES $ 287,505
---------
NET INCREASE IN CASH $ 32,930
Cash at beginning of period --
---------
CASH AT END OF PERIOD $ 32,930
=========
See accompanying notes.
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NOTE A: THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
The Forest Bank, LLC (the "Company") was organized as a limited liability
company (in the State of Delaware) on January 17, 2001. The mission of the
Company is to work in partnership with private landowners to promote the
economic productivity of working forests while protecting the ecological
health and natural diversity of the landscapes in which they occur.
The Company filed a Form S-1 Registration Statement with the Securities and
Exchange Commission (which became effective on June 27, 2001), in order to
offer membership interests in the Company to private landowners in exchange
for their timber rights.
Since January 17, 2001 (date of inception), the Company's efforts have been
devoted to raising capital. Further, as of November 7, 2001, the Company
has not commenced its operating activities. Accordingly, the Company is
considered to be in the development stage and the accompanying financial
statements are those of a development stage enterprise. Upon the successful
completion of its public offering, the Company expects to commence its
operations, which will consist primarily of the harvesting and managing of
standing timber.
CASH AND CERTIFICATE OF DEPOSIT
The Company maintains its cash balances and a certificate of deposit (which
had an original maturity of six months) at a financial institution located
in Washington, DC. Accounts at this institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances aggregate
approximately $197,000 at September 30, 2001.
DEFERRED OFFERING COSTS
Deferred offering costs represent legal, accounting and other filing fees
incurred in connection with a public offering of membership interests in
the Company. These costs will be charged against capital contributions
received in connection with the above-cited public offering. In the event
the offering is unsuccessful, these costs will be charged against the
operations of the Company.
INCOME TAXES
For tax purposes, the Company will be treated as a partnership.
Accordingly, net income (loss) of the Company will be allocated to the
individual members and included in the determination of their taxable
income.
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ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management 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 from those estimates.
NET LOSS PER MEMBERSHIP UNIT
Basic net loss per membership unit is determined by dividing net loss by
the weighted average number of membership units outstanding.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements presented herein have been
prepared by The Forest Bank, LLC in accordance with the accounting policies
described above. In the opinion of management, all adjustments which are
necessary for a fair statement of development stage activities for the
interim period presented have been made.
Since this is the Company's initial year of operations, the only balance
sheet required to be included in this filing is the balance sheet as of
September 30, 2001. An audited balance sheet as of June 15, 2001 was
included in the Form S-1 Registration Statement cited in Note A.
NOTE B: DUE TO THE NATURE CONSERVANCY
In July 2001, The Nature Conservancy paid registration fees of $100 on
behalf of the Company. The Company repaid the above-cited amount to The
Nature Conservancy on November 5, 2001.
NOTE C: MEMBER'S EQUITY
On January 30, 2001, The Nature Conservancy (the "Managing Member")
invested $500,000 and committed to provide management services (for a
period of five years, commencing on the effective date of the S-1
Registration Statement cited in Note A) to the Company, valued by the
parties at $750,000, in exchange for 1,500,000 Class M membership units.
The value ascribed to these management services was originally recorded in
the balance sheet as member's equity with a corresponding reduction in
equity of $750,000 for management services to be received. As the Managing
Member provides the management services, the Company will record a charge
to its operations with a corresponding reduction of the
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management services receivable. The company began receiving management
services from the Managing Member on July 1, 2001. Accordingly, the company
recorded management services expense and a corresponding reduction in
management services receivable in the amount of $37,500 for the quarter
ended September 30,2001. The Managing Member is a non-profit conservation
organization located in the United States.
Given the occurrence of certain events, the Managing Member may also be
obligated to provide up to $250,000 of additional cash to the Company,
under the terms of the Class M membership units cited above. This
contribution, when and if received, will be recorded as additional member's
equity.
NOTE D: LETTERS OF INTENT - TIMBER RIGHTS
The Company has one signed letter of intent (the agreement) with a
landowner that prevents the landowner from taking any action that might
harm timber located on his property for the period covered by the
agreement. The landowner received an initial payment of $100 prior to the
formation of the company and an additional payment of $100 in July 2001
when the agreement was renewed. In addition, if the landowner eventually
contributes his timber rights to the Company, the Company will be obligated
to pay the landowner an amount equal to 4% per annum (calculated from the
date of signing the letter of intent through the date of the actual deposit
of the timber rights into The Forest Bank, LLC) of the appraised value of
his timber rights on the date of the contribution. The current value of the
timber rights covered by these agreements is approximately $47,705.
The agreement for the existing letter of intent was renewed for one year in
July 2001. However, the landowner is under no obligation to contribute
their timber rights to the company and may rescind the above cited
agreement at any time. The additional payment of $100 for this renewal was
paid by The Nature Conservancy. The Company repaid The Nature Conservancy
on November 5, 2001.
Should the above-cited landowner contribute his timber rights to the
Company, he will do so in exchange for Class A membership units. However,
in the event the landowner contributed his timber rights into The Forest
Bank, LLC, the landowner may have the right, arising under the federal
securities laws, for a period of one year from the date of the
contribution, to rescind his contribution. Should the landowner be entitled
to rescind his contribution, his timber rights will be returned and he will
surrender his membership interest to the Company. Due to the nature of this
rescission clause, no amounts will be recorded as equity at the time this
landowner contributes their timber rights to the Company. Instead, such
amounts would be recorded as "Membership Units Subject to Rescission," and
would appear on the balance sheet after debt but before members' equity.
Such amounts will only be recorded as equity after the one-year rescission
period described above has expired.
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NOTE E: RESTRICTED CASH
In connection with the letter of intent described in Note D, the Company
has cash of $3,816 which is restricted for payment to the landowner cited
in Note D. This is currently the maximum amount which will be paid to the
landowner in the event that such landowner deposits their timber rights
into The Forest Bank, LLC.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This information contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although we believe that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, our
actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include the following: changes in general economic conditions, changes in local
real estate conditions, and our ability to acquire timber rights in exchange for
its membership interests.
We are not a bank and are not insured by the Federal Deposit Insurance
Corporation or any other similar entity.
The Forest Bank, LLC, was formed as a Delaware limited liability company in
January 2001. We are currently offering three different types of class A
membership units in exchange for contributions of rights to manage and cut
standing timber. This offering is being conducted pursuant to our registration
statement on Form S-1, which was declared effective by the U.S. Securities and
Exchange Commission on June 27, 2001. To date, we have not issued any class A
membership units, acquired any timber rights or entered into any binding
contracts to acquire any timber rights.
In our offering of class A membership interests in exchange for timber
rights, we will issue to each contributor a whole number of units of class A
membership interests in our company equal to the appraised dollar value of the
timber rights contributed. Each type of class A units will have differing rights
with respect to dividends and redemption. All of the proceeds from this offering
will be rights to manage and cut standing timber.
At September 30, 2001 our total assets were $509,241.
Gross revenues of $1,580 for the three months ended September 30, 2001,
represented interest income earned on a certificate of deposit held by the
Company. Because our company was formed on January 17, 2001, there is no
comparative financial data available for the prior fiscal year.
No cash distributions have been made to any members.
As of September 30, 2001, we had not entered into any arrangements creating
a reasonable probability that a property would be acquired by us.
Management expects that the current assets of the Company (composed of
cash, restricted cash, and a certificate of deposit) will be adequate to pay
operating expenses and to make anticipated distributions to our shareholders.
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Results of Operations
The Company has not yet commenced its operating activities and is therefore
considered a development stage company.
Item 3. Qualitative and Quantitative Disclosure about Market Risks.
None.
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 Matters 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) Current Report on Form 8-K - None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATE: November 13, 2001. The Forest Bank, LLC
(Registrant)
By: /s/ Kent W. Gilges
-------------------------------------
Kent W. Gilges
President and
Chief Executive Officer
By: /s/ Craig Neyman
-------------------------------------
Craig Neyman
Chief Financial Officer
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