Special Semiannual Financial Report under Regulation A Form 1 SA

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-SA

☒ SEMIANNUAL REPORT PURSUANT TO REGULATION A

or

☐ 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

By

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

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