UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _________________
Commission File No. 0-28067
FIRST RESERVE, INC.
-------------------
(Exact name of registrant as specified in its charter)
Florida 86-0740730
------------------------ --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1360 South Dixie Highway, Coral Gables, FL 33146
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 667-8871
----------------------------------------------
Issuer's Telephone Number, Including Area Code:
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if changed since last
report)
Indicate by a check mark whether the registrant: (1) has 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. [X ] Yes [ ] No
As of March 31, 2000, 6,767,050 shares of the Registrant's Common Stock,
no par value per share, were outstanding.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets
March 31, 2000 and December 31, 1999.....................................1
Condensed Consolidated Statements of Income and Accumulated Deficit
Three Months Ended March 31, 2000 and March 31, 1999.....................1
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and March 31, 1999.....................1
Notes to Condensed Consolidated Financial Statements.....................1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................1
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ........................................3
Signatures...........................................................................4
</TABLE>
ii
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Immediately following the signature page in this Form 10-QSB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Condensed
Consolidated Financial Statements of First Reserve, Inc. and subsidiaries, as of
March 31, 2000, and the related notes to the Condensed Consolidated Financial
Statements, along with the Consolidated Financial Statements of First Reserve,
Inc. and subsidiaries as of December 31, 1999 and March 31, 1999, and the
related Notes to Consolidated Financial Statements. The Company's Financial
Statements have been prepared in accordance with generally accepted accounting
principles in the United States.
The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to the continuing operations of the
Company.
RESULTS OF OPERATIONS
REVENUES. The Company's revenues increased approximately 16.7% for the 3-month
period ended March 31, 2000, over those for the 3-month period ended March 31,
1999. The percentage increase resulted from the following sources: (i) new
Plantation office (58.4%); (ii) Columbia Title acquisition (18.3%); (iii)
existing sales offices (27.1%); and (iv) mortgage company operations (-3.8%)
OPERATING EXPENSES. Operating expenses increased to approximately $6.01 million
for the 3-month period ended March 31, 2000 versus $5.10 million for the 3-month
period ended March 31, 1999. The significant components of the Company's
operating expenses are: commissions to real estate associates (64.6%), officer
and staff salaries (9.3%), office rental costs (13.0%), advertising expenses
(17.1%), promotional expenses (2.1%) and insurance (4.4%). The Company's
operating expenses also increased as a result of costs incurred by the Company
in connection with the acquisition of two residential real estate companies, the
acquisition of a title company and the pre-opening costs associated with the
creation of its two Broward County sales offices.
INTEREST. Interest income decreased slightly from $7,094 for the 3-month period
ended March 31, 1999 to $6,369 for the 3-month period ended March 31, 2000
primarily due to lower average daily balances of restricted cash.
NET LOSS FROM CONTINUING OPERATIONS. The Company had a net loss from operations
of approximately $158,800 for the 3-month period ended March 31, 2000 as
compared to a net loss of approximately
1
<PAGE>
$93,300 for the 3-month period ended March 31, 1999. This increase in net loss
from continuing operations resulted primarily from the opening of the offices in
Broward County and the acquisition of Columbia Title.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was approximately $483,000 for the 3-month
period ended March 31, 2000. This was primarily due to an increase in the amount
of cash received from customers.
Cash used for investing activities was approximately $254,700 for the 3-month
period ended March 31, 2000, primarily attributable to the purchase of property
and equipment and the purchase of certain businesses acquired by the Company.
Cash used in financing activities was approximately $572,000 for the 3-month
period ended March 31, 2000, principally due to pay downs on the Company's line
of credit.
At March 31, 2000, the Company had long term notes payable of approximately
$441,000. The Company has a $1.8 million "warehouse" line of credit to fund
loans to be made in connection with its mortgage banking operations. Each
"warehouse" loan is fully backed by a permanent loan "take-out" commitment from
a national lender of residential financing. As of March 31, 2000, the balance of
this "warehouse" line of credit was approximately $255,400 with a corresponding
asset of "mortgage loans held for sale" of $255,400.
At March 31, 2000, the Company had shareholder equity of approximately
$2,534,200. For the 3-month period ended March 31, 2000 the Company's deficit
in working capital (current assets minus current liabilities) was approximately
$39,000, primarily as a result of a significant decrease in mortgage loans held
for sale. The Company believes its current working capital will be sufficient to
support its presently-contemplated strategy for the next 12 months.
Our second office in Broward County was completed in April, 2000. We anticipate
that our Broward County offices will increase opportunities to substantially
increase sales. We anticipate that our title business will be profitable during
2000, and will contribute to our cash flow and our overall operations.
SEASONALITY
The Company's operations are principally based on the residential real estate
market in South Florida. These markets have historically been seasonal with
generally higher sales in the second and third fiscal quarters. Therefore, the
results of any interim period is not necessarily indicative of the results that
might be expected during a full fiscal year.
2
<PAGE>
FORWARD LOOKING STATEMENTS
From time to time, we make statements about our future results in this Form
10-QSB that may constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on our current expectations and the current economic environment. We caution you
that these statements are not guarantees of future performance. They involve a
number of risks and uncertainties that are difficult to predict. Our actual
results could differ materially from those expressed or implied in the
forward-looking statements. Important assumptions and other important factors
that could cause our actual results to differ materially from those in the
forward-looking statements, include, but are not limited to: (i) the continued
growth in the residential real estate market in South Florida; (ii) the general
availability of home mortgage financing at favorable rates; (iii) continued
positive economic climate in the United States; (iv) competition in our existing
lines of business; and (v) our ability to obtain and maintain working capital,
whether internally generated or from financing sources (on acceptable terms) in
order to finance our growth strategy.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
3
<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: May 15, 2000 FIRST RESERVE, INC.
By: /s/ Ronald A. Shuffield
----------------------------------
Ronald A. Shuffield, President and
Principal Financial Officer
4
<PAGE>
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2000, DECEMBER 31, 1999
AND MARCH 31, 1999
FIRST RESERVE, INC. AND SUBSIDIARIES
CORAL GABLES, FLORIDA
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
March 31, December 31,
2000 1999
------------- -------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 383,407 $ 727,130
Interest bearing deposit from bank 125,000 125,000
Receivables 352,587 356,331
Mortgage loans held for sale 255,400 830,620
Prepaid expenses and other 182,816 178,297
----------- ----------
Total current assets 1,299,210 2,217,378
---------- ---------
PROPERTY AND EQUIPMENT
Furniture and equipment 909,571 898,579
Office equipment 791,485 762,748
Transportation equipment 28,102 28,102
Leasehold improvements 643,322 435,323
Equipment held for sale under
capital leases 35,730 35,730
------------ -----------
2,408,210 2,160,482
Less accumulated depreciation (879,095) (823,743)
----------- -----------
Net property and equipment 1,529,115 1,336,739
---------- ---------
OTHER ASSETS
Goodwill, net 1,332,962 1,348,397
Deposits and other 175,212 87,834
----------- -----------
Total other assets 1,508,174 1,436,231
---------- ---------
Total assets $4,336,499 $4,990,348
========== =========
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
March 31, December 31,
2000 1999
------------- ------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 365,972 $ 297,063
Deferred mortgage fee income 11,946 22,740
Escrow deposits 10,652 4,909
Current portion of obligations under
capital leases 6,109 6,109
Current maturities of long term debt, net
of unamortized discount 943,575 1,011,382
------------ ----------
Total current liabilities 1,338,254 1,342,203
----------- ----------
LONG TERM LIABILITIES
Obligations under capital leases 22,884 24,299
Note payable, net of unamortized discount 441,144 930,826
------------ -----------
Total long term liabilities 464,028 955,125
------------ -----------
Total liabilities 1,802,282 2,297,328
----------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value, 100,000,000
authorized shares; 6,767,050 shares
issued and outstanding 5,939,507 5,939,507
Accumulated deficit (3,405,290) (3,246,487)
----------- -----------
Total stockholders' equity 2,534,217 2,693,020
----------- ----------
Total liabilities and stockholders'
equity $ 4,336,499 $ 4,990,348
=========== ==========
</TABLE>
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
--------------- --------------
<S> <C> <C>
REVENUES $ 5,860,272 $ 5,022,329
----------- ----------
COSTS AND EXPENSES
Commissions, fees and other incentives 3,784,440 3,353,048
General and administrative expenses 2,151,468 1,701,566
Depreciation and amortization 74,136 44,603
Legal and other settlements - 4,000
---------- -------------
Total costs and expenses 6,010,044 5,103,217
----------- ----------
Loss from operations before income
taxes and other income and expenses (149,772) (80,888)
----------- -------------
OTHER INCOME AND (EXPENSES)
Interest income 6,369 7,094
Interest expense (32,217) (18,864)
Other income 16,817 -
Other expenses - (708)
----------- -------------
Total other income and (expenses) (9,031) (12,478)
----------- -------------
Loss before income taxes (158,803) (93,366)
------------ -------------
PROVISION FOR INCOME TAX - -
Net loss $ (158,803) $ (93,366)
============ =============
ACCUMULATED DEFICIT, beginning of period (3,246,487) (3,801,966)
ACCUMULATED DEFICIT, end of period (3,405,290) (3,895,332)
============ =============
BASIC EARNINGS (LOSS) PER COMMON SHARE (.02) (.01)
============ =============
WEIGHTED AVERAGE COMMON SHARES 6,767,050 6,567,050
============ =============
DILUTED EARNINGS (LOSS) PER COMMON SHARES (.02) (.01)
============ ============
WEIGHTED AVERAGE DILUTED COMMON SHARES 6,767,050 6,651,629
============ ============
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
---------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash received from customers $ 5,875,782 $4,989,309
Interest received 6,369 7,094
Interest paid (51,074) (47)
Cash paid to suppliers and employees (5,923,014) (5,050,800)
Net decrease in mortgage loans held
for sale 575,220 -
Taxes paid - -
------------ -----------
Net cash provided by (used in)
operating activities 483,283 (54,444)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to employees (4,100) -
Net increase in deposits (2,915) (4,400)
Purchases of property and equipment (247,727) (331,298)
Payment for purchase of acquired companies;
net of cash received - 5,853
------------ -----------
Net cash used in investing activities (254,742) (329,845)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (pay downs) from line of credit (571,315) -
Payment on loan payable (949) -
Payment of capital lease obligation - -
------------ ------------
Net cash used in financing activities (572,264) -
------------ ------------
Net decrease in cash (343,723) (384,289)
CASH, beginning of period 727,130 1,055,160
------------ ---------
CASH, end of period $ 383,407 $ 670,871
============ ==========
</TABLE>
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
------------ --------------
RECONCILIATION OF NET INCOME TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(158,803) $(93,366)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 55,351 31,693
Amortization 15,435 11,706
Decrease (increase) in accounts receivable 3,744 (33,020)
Decrease in mortgage loans held for sale 575,220 -
(Increase) decrease in prepaid expenses and
other assets (84,882) 21,759
Increase in accounts and notes (operating)
payable and accrued expenses 82,269 6,784
Decrease in deferred mortgage fee income (10,794) -
Increase in escrow deposits 5,743 -
--------- --------
Net cash provided by (used in)
operating activities $ 483,283 $(54,444)
========= ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On March 31, 1999 the Company purchased all the stock of Columbis Title of
Florida, Inc. ("Columbia") for $100. As a result of this merger, accounted
for as purchase, assets of $104,267, goodwill of $66,090, and liabilities of
$170,257 were recorded.
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
In the opinion of management, the accompanying unaudited condensed
consolidated interim financial statements reflect all adjustments
(consisting of only normal and recurring adjustments) necessary to
present fairly the financial position of First Reserve, Inc. and
Subsidiaries ("the Company") as of March 31, 2000 and the results of
their operations and cash flows for the three-month periods then
ended March 31, 2000 and 1999. The results of operations for such
interim periods are not necessarily indicative of the results for a
full year. The accompanying unaudited condensed consolidated interim
financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and
with instructions to Form 10-QSB and, accordingly, do not include all
disclosures required by generally accepted accounting principles. The
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
the notes to the audited consolidated financial statements included
in the Company's Form 10-KSB annual report for 1999 filed with the
Securities and Exchange Commission.
The accounting policies followed for interim financial reporting are
the same as those disclosed in Note 1 of the notes to the
consolidated financial statements included in the Company's Form
10-KSB annual report for the year ended December 31, 1999.
NOTE 2 - ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
NOTE 3- BUSINESS COMBINATIONS
On March 31, 1999, the Company acquired all the stock of Columbia
Title of Florida, Inc. ("Columbia") in a business combination
accounted for as purchase. Columbia is engaged in the business of
closing real estate and mortgage loan transactions, primarily in the
South Florida area. Columbia has two branches, Miami and Key Largo,
Florida. Under the terms of the agreement, the shareholder of
Columbia (seller) received $100 for the stock of Columbia. The
agreement also provided for additional consideration if the assets of
the Key Largo branch were sold within ninety days of the acquisition
date. If this condition was met, the seller would received
eighty-five percent (85%) of the net proceeds of the sale of the
assets of the Key Largo branch. If the sale did not effectuate within
the ninety days, all the assets of the Key Largo branch would be
transferred back to the seller. The sale of the Key Largo branch was
made within the ninety day period. As a result, additional
consideration of $191,250 for the acquisition of the stock was
recorded after March 31, 1999. The total cost of the acquisition
<PAGE>
was approximately $191,350. Goodwill of approximately $257,340
resulting from this transaction is being amortized on the
straight-line method over 20 years. The results of operations of
Columbia are included in the condensed consolidated statements of
income from January 1, 2000 to March 31, 2000.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - BUSINESS COMBINATIONS (CONTINUED)
The unaudited pro forma information for the period set forth below
gives effect to the 1999 Columbia acquisition accounted for under the
purchase method of accounting as if it had occurred on January 1,
1999 after giving effect to certain adjustments, including increased
goodwill amortization generated from the acquisition. The proforma
adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The pro forma
information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually
would have been achieved had this transaction been consummated at the
beginning of the period presented:
Three Months
ended
March 31,
1999
Total revenue $5,165,386
=========
Net loss $ (113,317)
===========
Earnings per share
Basic $ (.02)
===========
Weighted average shares 6,567,050
===========
Diluted $ (.02)
===========
Weighted average shares 6,651,629
=========
NOTE 4 - CASH HELD IN TRUST
The Company maintains separately designated Trust accounts for home
buyers' earnest money, property owners, tenants and other third
parties. The Company holds such funds until sold properties are
closed and leases have expired. Funds are disbursed in accordance
with the settlement instructions or rental management agreements.
These funds are not recorded in the Company's financial statements as
they are held in a fiduciary capacity. At March 31, 2000 and 1999,
the Company held $5,487,924 of funds in trust, respectively.
NOTE 5 - MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale consist primarily of residential
mortgage loans made in connection with Embassy's mortgage banking
operations and are reported at
<PAGE>
the lower of cost or market value. The method used to determine this
amount is the commitment price from national lenders utilizing the
individual loan method. Net unrealized losses, if any, are recognized
through a valuation allowance by charges to income. Each loan is
fully backed by a permanent loan "take-out commitment" from a
national lender of residential financing. The mortgage loans are
purchased by the national lender once permanent financing is secured,
usually within five to twelve days of original funding.
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - LEGAL AND OTHER SETTLEMENTS
Included in legal and other settlements amounts are costs incurred by
EWM in settling various disputes arising with customers or tenants in
the ordinary course of business.
NOTE 7 - CONTINGENT SHARES
Under the terms of the September 30, 1998 merger agreement between
the Company and Gerard International Realty, Inc. ("Gerard"), the
former shareholders of Gerard would receive an additional 200,000
"contingent" shares of common stock of the Company, pending future
gross commission income to be generated by the former shareholders of
Gerard over a 24 month "review" period, beginning September 30, 1998.
These contingent shares were held in escrow. At September 30, 1999,
the former shareholders of Gerard had met the gross commission income
requirements stated in the agreement and 200,000 of contingent shares
were issued as common stock and valued at $1 per share. As a result,
goodwill and common stock of $200,000 was recorded.
NOTE 8 - EARNINGS PER SHARE
Basic earnings per share ("EPS") was computed by dividing net income
by the weighted average number of common shares outstanding during
the period. Diluted EPS were determined on the assumption that the
contingent shares where excised at the beginning of the period, or at
time of issuance, if later.
The following is the calculation of earnings per share:
Three Month Three Month
Period Ended Period Ended
March 31, 2000 March 31, 1999
-------------- -------------
Basic earnings per common share:
Numerator
Net income (loss) before
extraordinary items applicable
to common stockholders $ (158,803) $ (93,366)
Extraordinary items, net - -
----------- -----------
Income (loss) applicable to common
stockholders $ (158,803) $ (93,366)
=========== ===========
Denominator
Weighted average common shares 6,767,050 6,567,050
----------- -----------
Basic EPS $ (.02) $ (.01)
=========== ===========
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - EARNINGS PER SHARE (CONTINUED)
Diluted earnings per common share:
Three Month Three Month
Period Ended Period Ended
March 31, 2000 March 31, 1999
-------------- --------------
Numerator
Net income (loss) before
extraordinary items applicable
to common stockholders $ (158,803) $ (93,366)
Extraordinary items, net - -
----------- -------------
Income (loss) applicable to
common stockholders $ (158,803) $ (93,366)
=========== =============
Denominator
Weighted average common shares 6,767,050 6,651,629
----------- -------------
Diluted EPS $ (.02) $ (.01)
=========== =============
Warrants to purchase 500,000 shares of common stock at $2.57 per
share and 500,000 shares of common stock at $2.96 per share were
outstanding for the three month period ended March 31, 2000 and 1999,
but were not included in the computation of diluted EPS because the
warrants' exercise price was greater than the average market price of
the common shares. The warrants, which expire on August 31, 2003,
were still outstanding at the end of the three month periods ending
March 31, 2000 and 1999.
NOTE 9 - BUSINESS SEGMENT INFORMATION
The Company's operations are principally managed on a product
services basis and are comprised of three reportable segments:
Esslinger, Wooten and Maxwell, Inc. ("EWM"), Embassy Financial
Services, Inc. ("Embassy") and Columbia Title of Florida, Inc.
("Columbia"). EWM's product services consists of residential and
commercial real estate brokerage and relocation services. Embassy's
product services have been in the capacity of a mortgage lender and
mortgage broker in the South Florida area, specializing in
conventional, FHA and VA mortgages. Columbia's product has been in
the capacity of a title company. Revenue, net income and identifiable
assets for these segments are as follows:
<PAGE>
FIRST RESERVE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 - BUSINESS SEGMENT INFORMATION (CONTINUED)
Three month period ended March 31, 2000:
<TABLE>
<CAPTION>
Esslinger, Embassy Columbia
Wooten, Financial Title of First
Maxwell, Inc. Services, Inc. Florida, Inc. Reserve, Inc. Total
------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 5,463,030 $ 244,056 $153,186 $ - $ 5,860,272
Net income
(loss) $ (49,466) $ (17,384) $(52,162) $(39,791) $ (158,803)
Identifiable
assets at
period end $ 3,407,420 $ 528,051 $146,339 $254,689 $ 4,336,499
</TABLE>
Three month period ended March 31, 1999:
<TABLE>
<CAPTION>
Esslinger, Embassy Columbia
Wooten, Financial Title of First
Maxwell, Inc. Services, Inc. Florida, Inc. Reserve, Inc. Total
------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 4,746,755 $275,574 $ - $ - $ 5,022,329
Net income
(loss) $ (16,438) $(14,684) $ - $(62,244) $ (93,366)
Identifiable
assets at
period end $ 2,544,407 $289,163 $ 279,366 $ 94,623 $ 3,207,559
</TABLE>
NOTE 10 - REGULATORY MATTERS
HUD REQUIREMENTS
Embassy is a nonsupervised loan correspondent for purposes of the U.S.
Department of Housing Development ("HUD"). As such, 24-CFR Part 202 of the HUD
handbook requires Embassy to have an Adjusted Net Worth of at least $50,000.
Embassy is in compliance with this requirement.
STATE OF FLORIDA REQUIREMENTS
Embassy is also a licensed mortgage lender under Chapter 494 of the
State of Florida. As such, Embassy is required to have a minimum net worth of
$250,000. As of March 31, 2000, Embassy is not in compliance with this
requirement. Under Florida statutes, Embassy has 60 days to correct the
deficiency. Embassy expects to be in compliance through increased profits or by
First Reserve, Inc. Making a capital contribution within 60 days.
<PAGE>
EXIBIT INDEX
EXHIBITS DESCRIPTION
- -------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 383,407
<SECURITIES> 0
<RECEIVABLES> 352,587
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,299,210
<PP&E> 2,408,210
<DEPRECIATION> 979,095
<TOTAL-ASSETS> 4,336,499
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0
0
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</TABLE>
