U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
X Annual report under section 13 or 15(d) of the Securities Exchange
--- Act of 1934 (Fee required)
For the fiscal year ended February 28, 1998
--- Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from _________ to _________.
Commission File Number: 33-2749
FIRST MORTGAGE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Utah 87-0320209
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
257 East 200 South, Suite 950, Salt Lake City, Utah 84111
(Address of Principal Executive Offices) Zip Code
(801) 363-7663
(Registrant's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by 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
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 NO X
------- -------
Indicate by check mark if there is disclosure of delinquent filers in
response to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. N/A
-----
The aggregate market value of the voting stock held by non-affiliates
(17,389,005 shares) based upon the price at which the stock was sold, as
reported by management of the issuer, was approximately $325,000.
The number of shares of Common Stock of the issuer outstanding as of July
6, 1998 was 51,101,680.
Documents Incorporated by Reference
A portion of the exhibits in Part III of the issuer's registration
statement on Form S-18 is incorporated by reference into Part III of this Form
10-K.
<PAGE>
TABLE OF CONTENTS
Page
------
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 4
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . . 4
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 5
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . 6
Item 9. Changes in Disagreements With Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . . 6
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 7
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 8
Item 12. Security Ownership of Certain Beneficial Owners and Management . 8
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 9
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .10
<PAGE>
PART I
Item 1. Business.
- ------------------
General
- -------
First Mortgage Corporation (the "Company") was organized under the
corporation laws of the State of Utah on March 1, 1977, for the purpose of
engaging in the real estate mortgage business, related activities, and other
general purposes. The Company is currently engaged in the acquisition of
interests in non-performing loan packages from various government and private
financial organizations. Following acquisition of such loan packages, the
Company attempts to collect such loans. In addition, the Company owns and
manages commercial real estate located in Pocatello, Idaho, and Phoenix,
Arizona. (See Item 2. Property.)
Industry Background
- -------------------
The Federal Deposit Insurance Corporation (the "FDIC") was organized in
part to insure against failing financial institutions. In this capacity the
FDIC often takes over failing financial institutions and liquidates the assets
of the particular financial institution, including packages of loans either
originated from the financial institution or serviced by such institution.
In the mid-1980s many savings and loan institutions failed for various
reasons. The Resolution Trust Corporation (the "RTC") was created to liquidate
these savings and loan institutions, and in many cases to sell off packages of
loans held by such savings and loan facilities.
Many private financial institutions such as financing and mortgage
companies also liquidate loan packages for many reasons, including loan
packages which have performed poorly.
In most instances the FDIC, RTC, and private financial institutions will
place these loan packages for sale either on a sealed bid basis or in an
auction proceeding. Investors have an opportunity to review the particular
loan packages and bid on such packages. Generally, such packages are sold to
the highest bidder and payment is required within a reasonably short period.
Business of the Company
- -----------------------
Since the mid-1980s the Company has been engaged primarily in the business
of bidding on and collecting delinquent and other loans purchased from the
FDIC, the RTC, and private financing companies. Mr. Greaves, the president of
the Company, has been principally responsible for the evaluation of loan
packages and bidding for the purchase of such packages. Generally, the Company
receives notice of loan packages through direct mailings to the Company or
through advertisements in trade journals or newspapers. Each loan package
consists of from a few to several hundred non-performing individual loans, with
most loan packages consisting of from ten to fifty such loans. After
determining for which loan packages to bid, Mr. Greaves will visit the site of
the financial institution holding the loan package and review the books and
records relating to the particular loan package.
<PAGE>
The bidding process for the various loan packages will vary depending upon
the type of financial institution involved. Generally, the Company will
determine the potential for successful collection and will estimate the cost of
collection, including the location of the originating loans. Based upon the
information developed from this process, the Company will place a bid with the
financial institution or will attend the auction and bid on the package.
Management believes that it is successful in approximately twenty percent of
the bids made for loan packages, or parts of such loan packages.
Financing for the acquisition costs of the particular loan packages is
furnished in part by funds provided by the Company and by others in joint
venture arrangements on each individual loan package. In general, the Company
will seek from ten to fifty percent participation by such joint venture
partners. Typically, the Company has entered into joint venture arrangements
with Eiger Enterprises, Ltd. a limited partnership affiliated with Susan and
Bryce Wade, beneficial owners of in excess of five percent of the outstanding
shares of the Company. (See Item 12. Security Ownership of Certain Beneficial
Owners and Management, and Item 13. Certain Relationships and Related
Transactions.)
The Company handles all collection procedures in-house, except where legal
action is required to collect delinquent loans. In such instances the Company
engages local attorneys to bring collection actions in the city in which the
debtor is located.
In the year ended February 28, 1998, the Company acquired no new loan
packages. The Company feels that there will be very few loan packages
available in the foreseeable future. The Company has provided Bridge Loans on
building lots and houses. The notes are all secured by the real estate, and
all are due within twelve months of the date of the indebtedness instrument and
bear interest between 15% and 18% per annum.
Competition
- -----------
The Company competes against a number of companies which are better
financed and have more employees than the Company. There are a number of much
larger companies which compete in acquiring loan packages involving first
mortgages on single family dwellings; however, the Company does not bid on such
packages.
Management believes that the number of available loan packages from failed
financial institutions is becoming very limited. Most of the savings and loan
institutions have been fully liquidated and the number of banks which fail is
fewer than in previous years. Consequently, the Company has fewer loan
packages for which it can bid, and the competition for, and cost of, such
packages is becoming greater.
Regulation
- ----------
On September 20, 1977, Congress enacted the Federal Fair Debt Collection
Practices Act, codified at 15 U.S.C. Section 1692, et seq.(the "Act"), and
amended it in 1986. The Act extends its protection only to certain persons,
and applies its prohibitions only to certain debt transactions and to a limited
category of persons or entities collecting debts. In general, the protections
of the Act are extended only to consumers who are natural persons who incurred
debt for personal, family, or household purposes. In other words, the Act does
not apply to the collection of commercial or business debts. Also, the Act
does not apply to debt collectors who collect debts for themselves rather than
for others.
<PAGE>
Only a small number of the debts collected by the Company involve consumer
debts. Also, all of the loan packages are collected for the benefit of the
joint venture which owns the loan package. Therefore, the Company does not
believe that the Act applies to the operations of the Company, even in
connection with the collection of consumer debts.
A number of states have enacted similar debt collection legislation. The
Company believes that it is either exempt from such legislation or it is in
compliance with such laws.
Employees
- ---------
As of July 5, 1998, the Company had no full-time employees. Mr. Greaves,
the President of the Company devotes approximately one-half of his time to the
business of the Company. (See Item 10. Directors and Executive Officers of the
Registrant.)
Patents and Trademarks
- ----------------------
The Company does not own any patents or trademark rights.
Item 2. Property.
- ------------------
Office Space
- ------------
The principal executive offices of the Company are located at 257 East 200
South, Suite 950, Salt Lake City, Utah, and consists of approximately 1,000
square feet of office space which it sublets on a month to month basis for $725
per month from DeWaal, Keeler & Company, Certified Public Accountants. (See
Item 13. Certain Relationships and Related Transactions.)
Idaho Property
- --------------
The Company owns an eighty percent (80%) interest as a tenant in common
with an unrelated third party in approximately 5.58 acres of undeveloped
commercial real property located in Pocatello, Idaho. During the fiscal year
ended February 28, 1993, the Company partitioned the land previously owned by
the Company by exchanging its tenant in common interest in approximately twelve
acres adjoining the present acreage for the existing tenant in common interest
in a parcel which consists of frontage property on the corner of Center Street
and the on-ramp to Interstate 15 in downtown Pocatello, Idaho.
The Company currently intends to sell or lease the property for commercial
development; however, the Company does not intend to develop the land itself or
to operate any business on the property. The Company has no formal or written
agreement with the holder of the remaining twenty percent interest in the
property, and any decision to sell or lease the land would need to be done in
conjunction with such party. The president of the Company has had a
long-standing business relationship with such party and therefore believes that
the Company will be able to reach an equitable arrangement with such party
should the Company decide to sell or lease the property. In addition, the
Company has agreed to cooperate in any development of the property which may
include the adjacent parcel in which the Company previously held an interest,
but no formal agreement has been discussed or reached.
Item 3. Legal Proceedings.
- ---------------------------
Neither the Company nor any of its properties is a party to any material
pending legal proceedings, including any material bankruptcy, receivership, or
similar proceeding. Management of the Company does not believe that there are
any material proceedings to which any director, officer or affiliate of the
Company, any owner of record or beneficially of more than five percent of the
common stock of the Company, or any associate of any such director, officer,
affiliate of the Company, or security holder is a party adverse to the Company
or has a material interest adverse to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
No matter was submitted during the fourth quarter of the year ended
February 28, 1998, to a vote of the security holders.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters.
- -------------------------------------------------------------------------------
The Common Stock of the Company is not currently traded, and there is no
established public trading market for the Common Stock. There are no market
markers in the Common Stock. Management believes that there exists a very
limited or no degree of liquidity associated with the stock. Management is not
aware of actual trading volumes in the stock for the most recent two fiscal
years or since the end of the most recent fiscal year. In addition, management
is not able to provide the high and low bid quotations since no market trades
are known by management to have occurred during the prior two fiscal years or
since the end of the most recent fiscal year.
As of July 6, 1998, there were approximately 300 holders of record of the
Common Stock of the Company as reported to the Company by its transfer agent.
The Company has not declared any cash dividends on any class of common
equity for the last two fiscal years or subsequent to the most recent fiscal
year end. The Company does not anticipate declaring or paying any dividends in
the foreseeable future.
<PAGE>
Item 6. Selected Financial Data.
- ---------------------------------
<TABLE>
<CAPTION>
02/28/98 02/28/97 02/29/96 02/28/95 02/28/94
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenue $577,383 $59,908 $98,161 $131,529 $153,493
Operating Expenses 219,298 96,744 87,607 84,118 77,930
Income from Operations 358,085 (39,836) 10,554 47,111 75,563
Interest (Loss) Expenses -0- 3,753 1,120 4,287 2,143
Provisions for Taxes (124,673) (4,741) 3,419 9,422 16,108
Net Income (Loss) 233,412 (35,095) 9,654 37,689 57,312
Earnings Per Share 0.01 0.00 0.00 0.00 0.00
Shares Outstanding 51,101,680 51,101,680 51,101,680 51,101,680 51,101,680
Balance Sheet Data
Cash & Cash Equivalent 498,335 470,153 340,577 435,781 374,370
Total Assets $912,543 $553,575 $730,367 $761,587 $545,523
Total Debt -0- -0- 141,697 182,571 4,196
Shareholders' Equity 786,987 553,575 588,670 579,016 541,327
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations.
- ----------------------
Result of Operations
- --------------------
The Company earns revenues from the collection of contracts purchased
primarily from the RTC and the FDIC, as well as from private financial
institutions. Contracts are purchased by competitive bids on packages of loans
from failed savings and loan and other financial associations. Loan packages
are awarded to the highest bidder and such bidder must take all loans included
in the package. There is no recourse or other guarantee that any of the loans
can be collected or that the Company will be able to recover its costs in the
package of loans.
Loan packages vary in size in the number of loans included and the
potential dollar amount of recovery. When the Company wishes to share the risk
of collection of the loan packages, it will enter into arrangements with other
investors. When these arrangements are made, both the Company and the other
investors receive proportionate interest in the proceeds.
<PAGE>
The Company does not recognize income of any specific loan packages until
such time as the entire investment is recovered. Since the Company has no
recourse or other guarantee on the collect ability of the loan packages, and
since as a general rule there is no market for factoring or marketing the loans
individually, the fair market value of the loan packages is undeterminable and
is presented on the financial statements at its cost, less amounts collected.
The Company's business is affected by general economic conditions. As
failure rates of savings and loan associations or other regulated banking
institutions improve, the availability of loan packages decreases and the
competition becomes more intense for the available packages. These factors
create uncertainty as to the Company's ability to acquire economical loan
packages with acceptable risk factors.
The Company has collected $250,000 in loan packages recoveries since
February 28, 1998. The Company does not anticipate significant collection on
existing loan packages it has purchased and has no prospect for the acquisition
of loan packages in the future.
Liquidity and Capital Resources
- -------------------------------
The Company's cash requirements consist principally of working capital,
and payment of principal and interest on its outstanding indebtedness. The
Company has no plans for capital expenditures. At February 28, 1998 and
February 28, 1997, the Company had working capital of $786,987 and $553,575,
respectively. Cash and cash equivalents balances were $498,335 and $470,153,
respectively. The Company's growth in working capital at February 28, 1998,
and February 28, 1997, was attributable to its operations. Operations
accounted for all increases in cash flows for the years ended February 28, 1998
and February 28, 1997.
The Company believes that cash from operating activities will be
sufficient to finance its activities for its fiscal year ending February 28,
1999.
Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------
The following financial statements are attached hereto and incorporated
herein:
Page
------
Independent Auditor's Report F-2
Balance Sheets for the years ended February 28, 1998 and 1997 F-3
Item 9. Changes in and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure.
- ---------------------
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
- -------------------------------------------------------------
The following information is provided for each of the executive officers
and directors of the Company:
WILLIAM S. GREAVES has been the President and a Director of the Company
since 1977. Mr. Greaves devotes approximately half of his time to the business
of the Company. Since approximately 1980, he has been the president of Green
River Development Associates, Inc., a privately held company engaged in
providing retail services to long-haul truckers. Mr. Greaves received his
bachelor of science degree in 1966 in sociology and business from Utah State
University, and his masters of public administration in 1970 from the
University of Southern California. Age 52.
STANLEY R. DE WAAL has been the Secretary and Treasurer of the Company
since 1977 and has been a Director of the Company since 1977. He is certified
public accountant and a senior partner in DeWaal, Keeler & Company, Certified
Public Accountants, which has been his principal occupation for at least the
past five years. (See Item 13. Certain Relationships and Related
Transactions.) Age 62.
DONALD L. SMITH has been a Director of the Company since 1977. From 1975
to 1991 Mr. Smith was the owner of Smith Agency/Insurance Associates, an
independent insurance agency. Since 1991 he has been an insurance agent for
ATP Insurance, Inc., an independent insurance agency. Age 63.
The Company believes that the potential success of the business of the
Company is significantly dependent upon the services of its current president,
Mr. Greaves. The Company has no employment agreement with Mr. Greaves and
carries no life insurance upon his life. In addition, if Mr. Greaves leaves
the Company, he is not prohibited by any contract from competing with the
Company in its business ventures. The Company believes that the loss of the
services of Mr. Greaves could have a material negative impact upon the current
business of the Company.
The term of office of each director is one year and until his successor is
elected at the annual meeting of the Company and qualified. The term of office
for each officer of the Company is at the pleasure of the Board of Directors.
The Board of Directors has no nominating, auditing or compensation committee.
The Bylaws of the Company provide that the annual meeting of the stockholders
shall be held on the third Friday in March of each year or at such other time
as the Board of Directors may from time to time determine. There are no
arrangements or understandings between any of the officers or directors and any
other person(s) pursuant to which such officer or director was selected as an
officer or director. There are also no family relationships between any
director or executive officer of the Company.
During the most recent fiscal year ended February 28, 1998, the Company
did not have a class of equity securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended. Therefore, no Forms 3,4, or 5
were filed during such year.<PAGE>
Item 11. Executive Compensation.
- ---------------------------------
The following table sets forth the aggregate executive compensation paid
by the Company for the fiscal years ended February 28, 1998 and 1997, and
February 29, 1996.
<TABLE>
<CAPTION>
Other All
Name & Annual Restricted LTIP Other
Principal Compen- Stock Options Pay- Compen-
Position Year Salary Bonus sation Award(s) /SAR(s) outs saton
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William S. Greaves,
President 1998 - - $182,000 - - - -
1997 - - 60,500 - - - -
1996 - - 38,600 - - - -
</TABLE>
(1) Mr. Greaves' received this compensation as commission on individual
packages of loans managed by the Company.
Mr Greaves' compensation is determined on the basis of each individual
loan package purchased by the Company. In general, Mr. Greaves receives from
approximately twenty to forty percent of the proceeds of the loan packages
after the initial purchase price for the package is collected and paid to the
Company and the other joint venture investors.
No other executive officer of the Company received any compensation
exceeding $100,000 for the fiscal years ended February 28, 1998 and 1997 and
February 29, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The following table sets forth certain information concerning the stock
ownership as of August 31, 1995, of (I) each person who is known to the Company
to be the beneficial owner of more than 5 percent of the Company's Common
Stock; (ii) all directors; (iii) each of the executive officers; and (iv)
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Name & Address of Amount & Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- ------------------- ------------------------ -------------------- ----------
<S> <C> <C> <C>
Common Stock William S. Greaves 25,601,100 50.08%
($.001 par value) 2924 LaJoya Drive
Salt Lake City, UT 84124
Common Stock Stanley De Waal -0- *
($.001 par value)
Common Stock Donald L. Smith 25,000 *
($.001 par value)
Common Stock Susan and Bryce Wade 8,086,575 15.82%
($.001 par value) 2205 Pheasant Way
Salt Lake City, UT 84121
<PAGE>
Common Stock Directors and Executive 25,626,100 50.12%
($.001 par value) Officers as a Group
(3 Persons)
</TABLE>
* Represents less than one percent of the total outstanding shares.
There are no arrangements, known to the Company, the operation of which
may at a subsequent date result in a change of control of the Company.
However, the Company is seeking additional business ventures, the acquisition
of which could result in a change of control of the Company. The Company
presently has not entered into any arrangements with any party in connection
with a potential acquisition.
Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------
The Company sublets its principal executive offices from DeWaal, Keeler &
Company, Certified Public Accountants. Mr. DeWaal, an officer and director of
the Company, is a senior partner in such accounting firm. Management believes
that the price paid for such space is equal to or less than would be paid for
similar space from a non-affiliated third party. The Company has no written
contract for such services. (See Item 2. Property and Item 10. Directors and
Executive Officers of the Registrant.)
These shares are held of record by W.S. Greaves & Associates, Inc., a
company controlled by Mr. Greaves. Mr. Greaves is the sole shareholder,
officer, and director of this company.
These shares are held of record by Fay B. Smith, the wife of Mr. Smith.
Mr. Smith is deemed to share beneficial ownership in such shares with his wife
by virtue of such relationship.
These shares are held of record by Eiger Enterprises, Ltd., a family
limited partnership. Eiger, Inc., a company owned by Mrs. Wade, is the general
partner of such limited partnership. Mr. and Mrs. Wade are husband and wife,
and therefore, Mr. Wade is deemed to share beneficial ownership in such shares
with his wife by virtue of such relationship, although he has no legal
ownership in such shares.
DeWaal, Keeler & Company, Certified Public Accountants, provides
accounting services for the Company. Mr. DeWaal, an officer and director of
the Company, is a senior partner in such accounting firm. Management believes
that the price paid for such accounting services is equal to or less than would
be paid for similar services from a non-affiliated third party. The Company
has no written contract for such services. (See Item 10. Directors and
Executive Officers of the Registrant.)
DeWaal, Keeler & Company, Certified Public Accountants, provides
accounting services for Green River Development Associates, Inc., a company
controlled by Mr. Greaves, an officer and director of the Company. Mr. DeWaal,
an officer and director of the Company, is a senior partner in such accounting
firm. In addition, ATP Insurance, Inc., an independent insurance agency
affiliated with Mr. Smith, a director of the Company, provides insurance
products for Green River Development Associates, Inc. (See Item 10. Directors
and Executive Officers of the Registrant.)
Stanley DeWaal, an officer and director of the Company, is the general
partner of Center Street Associates, Ltd. ("CSA"), a Utah limited partnership
which owns approximately 37.5 acres of the parcel of unimproved real property
which originally included the 5.58 acres of unimproved real property in which
the Company owns an 80% interest located in Pocatello, Idaho. CSA was one of
the parties, together with the Company and other unrelated parties, which
originally owned a percentage interest in the entire tract which was
reapportioned during the fiscal year ended February 28, 1993. In addition, CSA
and the Company agreed to guaranty the owner of an adjacent parcel that such
property could be sold in an are's-length transaction for not less than
$100,000, or CSA would pay the difference between the selling price and
$100,000, but not to exceed $10,000. (See Item 2. Property.)
Eiger Enterprises, Ltd. has currently, and has from time to time, entered
into arrangements with the Company in connection with the purchase of loan
packages. However, the Company has no written contracts in connection with
such arrangements. Eiger Enterprises, Ltd. is a limited partnership the
general partner of which is Eiger, Inc., a company controlled by Susan Wade.
Mrs. Wade and her husband, Bryce Wade, are deemed the beneficial owners of in
excess of five percent of the outstanding shares of the Company. During the
fiscal year ended February 29, 1996, Eiger Enterprises, Ltd. invested in such
joint arrangements. (See Item 1. Business, Item 2. Property, and Item 12.
Security Ownership of Certain Beneficial Owners and Management.) The Company
provides to Mr. Wade a nominal amount of office space at no charge; the Company
has no written contract for such arrangement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- ---------------------------------------------------------------------------
(a) See Item 8 above for a list of the financial statements filed as a
part of this report.
(b) The following exhibits are furnished with this Report as required by
Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No Description of Exhibit Page
---------- ----------------------------- ------
<C> <C> <C>
3.1 Articles of Incorporation, as amended *
3.2 By-Laws of the Company currently in effect *
</TABLE>
* Filed as an exhibit with the Company's registration statement on Form S-18
effective November 7, 1986.
(c) No reports on Form 8-K were filed by the Company during the last quarter
of the period covered by this report.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) 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.
FIRST MORTGAGE CORPORATION
By:/S/ William S. Greaves
---------------------------
Date: July 22, 1998 William S. Greaves, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: ----------------------------------- Date: July 22, 1998
William S. Greaves, Director, Chief
Financial Officer and Principal
Accounting Officer
By: -----------------------------------
Stanley R. DeWaal, Director
By: -----------------------------------
Donald L. Smith, Director
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
The Company has not furnished to its shareholders an annual report
covering the registrant's fiscal year ended February 28, 1998. No proxy
statement, form of proxy or other proxy soliciting material has been sent to
any of the registrant's security-holders with respect to any annual or other
meeting of the security-holders. The registrant has no immediate plans to
furnish any proxy material to its security-holders subsequent to the filing of
this annual report on Form 10-K. However, the Company intends to furnish its
shareholders an annual report for the year ended February 28, 1998.
<PAGE>
FIRST MORTGAGE CORPORATION
FINANCIAL STATEMENTS
February 28, 1998
&
February 28, 1997
F-1
<PAGE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, #300
Salt Lake City, Utah 84111
801-521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
----------------------------
Board of Directors
FIRST MORTGAGE CORPORATION
I have audited the accompanying balance sheets of FIRST MORTGAGE
CORPORATION, as of February 28, 1998 and 1997, and the related statements of
operations, stockholders' equity and cash flows for the years ended February
28, 1998, and 1997, and February 29, 1996. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of FIRST MORTGAGE CORPORATION, as
of February 28, 1998 and 1997, and the results of its operations and its cash
flows for the years ended February 28, 1998 and 1997, and February 29, 1996, in
conformity with generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
June 30, 1998
F-2
<PAGE>
FIRST MORTGAGE CORPORATION
Balance Sheets
February 28, 1998 and 1997
<TABLE>
<CAPTION>
February February
28, 1998 28, 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
- --------------
Cash in Bank $ 198,335 $ 48,153
Cash in Savings 100,000 422,000
Other Receivables 9,509 -0-
Contracts Receivable 15,000 34,430
Prepaid Taxes -0- 4,742
Notes Receivable 339,000 -0-
------------ ------------
Total Current Assets 661,844 509,325
Fixed Assets
- ------------
Office Equipment 2,261 -0-
Leasehold Improvements 470 610
------------ ------------
Total Fixed Assets 2,731 610
Other Assets
- ------------
Certificate of Deposit 200,000 -0-
Land - (Note #4) 47,968 43,640
------------ ------------
Total Other Assets 247,968 43,640
------------ ------------
TOTAL ASSETS $ 912,543 $ 553,575
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
FIRST MORTGAGE CORPORATION
Balance Sheets -Continued-
February 28, 1998 & 1997
<TABLE>
<CAPTION>
February February
28, 1998 28, 1997
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 883 $ -0-
Taxes Payable 124,673 -0-
------------ ------------
Total Current Liabilities 125,556 -0-
Stockholders' Equity
- --------------------
Common Stock, 100,000,000 Shares
Authorized at $0.001 Par Value;
51,101,680 Shares Issued & Outstanding 51,102 51,102
Capital in Excess of Par Value 242,697 242,697
Retained Earnings 493,188 259,776
------------ ------------
Total Stockholders' Equity 786,987 553,575
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 912,543 $ 553,575
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
FIRST MORTGAGE CORPORATION
Statements of Operations
For the Fiscal Years Ended
February 28, 1998 & 1997, February 29, 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
- --------
Mortgage Recovery $ 543,070 $ 35,000 $ 78,618
Interest 31,035 19,849 16,653
Miscellaneous 1,802 -0- -0-
Bad Debt Recovery 1,476 2,059 2,890
------------ ------------ ------------
Total Revenues 577,383 56,908 98,161
Expenses
- --------
Commission Expense 182,400 60,800 38,200
Interest Expense -0- 3,753 1,120
Office Expense 6,002 6,272 8,387
Rents 8,700 9,276 8,700
Professional Fees 4,931 3,551 12,004
Telephone 2,932 4,031 1,995
Depreciation 538 195 394
Land Expense (Note #6) 757 1,000 6,629
Travel 12,036 7,379 2,515
Taxes 1,002 487 7,663
------------ ------------ ------------
Total Expenses 219,298 96,744 87,607
------------ ------------ ------------
Net Profit (Loss) from Operations 358,085 ( 39,836) 10,554
Other Income
- ------------
Net Rent Income -0- -0- 2,519
------------ ------------ ------------
Net Income Before Taxes 358,085 ( 39,836) 13,073
Income Taxes ( 124,673) 4,741 ( 3,419)
------------ ------------ ------------
Net (Loss) Profit After Taxes $ 233,412 ($ 35,095) $ 9,654
============ ============ ============
(Loss) Earnings Per Share .01 ( .00) .00
Weighted Average Shares
Outstanding 51,101,680 51,101,680 51,101,680
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
FIRST MORTGAGE CORPORATION
Statements of Stockholders' Equity
From March 1, 1993 to February 28, 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid in Retained
Shares Amount Capital Earnings
------------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
March 1, 1993 51,101,680 $ 51,102 $ 242,697 $ 190,216
Income for
Year Ended
February 28, 1994 57,312
Balance,
February 28, 1994 51,101,680 51,102 242,697 247,528
Income for
Year Ended
February 28, 1995 37,689
------------------------------------------------------
Balance,
February 28, 1995 51,101,680 51,102 242,697 285,217
Income For
Year Ended
February 29, 1996 9,654
------------------------------------------------------
Balance,
February 29, 1996 51,101,680 51,102 242,697 294,871
Loss for Year Ended
February 28, 1997 (35,095)
------------------------------------------------------
Balance,
February 28, 1997 51,101,680 51,102 242,697 259,776
Loss for Year Ended
February 28, 1998 233,412
------------------------------------------------------
Balance,
February 28, 1998 51,101,680 $ 51,102 $ 242,697 $ 493,188
======================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
FIRST MORTGAGE CORPORATION
Statements of Cash Flows
For the Fiscal Years Ended
February 28, 1998, 1997 and February 29, 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Income (Loss) $ 233,412 ($ 35,095) $ 9,654
Adjustments to Reconcile Net Income or
(Loss) To Operating Activities:
Depreciation 538 195 13,566
Changes in Operating Assets and Liabilities:
(Increase) in Prepaid Taxes -0- ( 2,614) ( 2,128)
(Increase) Decrease in Other Receivables ( 9,509) -0- -0-
(Increase) Decrease in Accounts Receivable -0- 100,000 ( 49,708)
(Decrease) Increase in Accounts Payable 883 ( 1,697) ( 26,992)
Increase (Decrease) in Taxes Payable 124,673 -0- ( 6,901)
(Increase) Decrease in Prepaid Taxes 4,742 -0- -0-
----------- ----------- -----------
Net Cash (Used) Provided by
Operating Activities 354,739 60,789 ( 62,509)
Cash Flows from Investing Activities
- ------------------------------------
Purchase of Long Term CD ( 200,000) -0- -0-
Purchase of Land ( 4,328) ( 17,224) -0-
Cash Received on Contracts 34,430 229,200 215,118
Investment in Contracts ( 354,000) ( 3,189) ( 159,035)
Non Cash Changes in Contracts -0- -0- ( 81,797)
Purchase of Office Equipment ( 2,659) -0- -0-
(Decrease) Increase in Notes Payable -0- ( 140,000) ( 6,981)
----------- ----------- -----------
Net Cash Provided by Investing
Activities ( 526,557) 68,787 ( 32,695)
Cash Flows from Financing Activities
- ------------------------------------
Net Cash Provided by Financing
Activities -0- -0- -0-
----------- ----------- -----------
Increase (Decrease) in Cash ( 171,818) 129,576 ( 95,204)
Cash at Beginning of Year 470,153 340,577 435,781
----------- ----------- -----------
Cash at End of Year $ 298,335 $ 470,153 $ 340,577
=========== =========== ===========
Expense Disclosures
- -------------------
Interest $ -0- $ 3,753 $ 61,794
Taxes 124,673 -0- 3,419
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements
NOTE #1 - Corporate History and Purpose
- ---------------------------------------
The Company was incorporated on March 1, 1977, under the laws of the State of
Utah and amended its articles of incorporation April 5, 1982.
The Company's purpose is to act as a Real Estate Mortgage Broker and to take
advantage of any legal business opportunity which appears to have profitable
potential for the Company.
NOTE #2 - Summary of Significant Accounting Policies
- ----------------------------------------------------
1. Depreciation on assets is recorded using the straight-line method and a 6
or 10 year life.
2. The Company uses the accrual method of accounting.
3. Revenues and expenses are recognized in the period in which the activities
occur.
4. The Company has had no noncash financing activities.
5. The Company considers all short term, highly liquid investments that are
readily convertible to known amounts, within ninety days as cash.
6. Noncash Investing Activities; In 1992, the Company exchanged its 50%
undivided interest in 12.5 acres of Commercial land in Pocatello, Idaho
for 80% of 5.58 frontage in the same parcel.
7. Estimates: The preparation of the 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 - Public Offering of Common Stock
- -----------------------------------------
In 1987, the Company completed a public offering of 8,750,000 shares of its
authorized but unissued common stock to the public at $0.02 per share. All
costs associated with the public offering have been netted against offering
proceeds.
NOTE #4 - Commercial Land
- -------------------------
The Company is a common tenant with an undivided 80% interest in 5.58 acres of
commercially zoned land in Pocatello, Idaho. The acreage is in the Northeast
quadrant of the intersection of Center Street and the I-15 Freeway. The
location of the property is near Idaho State University and across the street
from the Intermountain Health Care facility. The land is presently vacant, and
has no encumbrances. Feasibility studies have been done so that development
might be undertaken.
NOTE #5 - Depreciation of Fixed Assets
- --------------------------------------
The following is a summary of leasehold improvements and office equipment at
cost, accumulated depreciation, and depreciation expense.
F-8
<PAGE>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #5 - Depreciation of Fixed Assets -Continued-
- --------------------------------------------------
<TABLE>
<CAPTION>
Accumulated Depreciation
Cost Depreciation Expenses
Assets 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leasehold Improvements $ 1,400 $ 1,400 $ 930 $ 790 $ 140 $ 140
Office Equipment 5,339 4,348 3,078 4,348 398 55
----------------------------------------------------------
Total $ 6,739 $ 5,748 $ 4,008 $ 5,138 $ 538 $ 195
==========================================================
</TABLE>
Depreciation for all fixed assets is computed using the straight-line method
with useful lives of 6 or 10 years on both classes of assets.
NOTE #6- Land Expenses
- ----------------------
The Company paid expenses on the land described in Note #4 as follows.
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------
<S> <C> <C> <C>
Taxes $ 508 $ 487 $ 503
Engineering & Legal 248 -0- 4,126
Management -0- 1,000 2,000
----------------------------
Total Expenses $ 756 $1,487 $6,629
============================
</TABLE>
NOTE #7 - Resolution Trust Contracts
- ------------------------------------
The Company purchased from the Resolution Trust Corporation, and the F.D.I.C.
loan packages, in years prior to the year ended February 29, 1998. During the
year ended February 28, 1998, no new loan packages were acquired and the
Company collected all of its investment in the loan packages held at March 1,
1997. The Company does not anticipate significant collections on loan packages
beyond the $250,000 collected at the date of this report. These loan packages
were bought by sealed competitive bid. At date of purchase the Company has no
guarantee it can recover its investment or collect any of the principal
balance. The Company has adopted the practice of recovering its investment
then recognizing as income all proceeds of collection efforts in the period in
which the money is received.
The Company has acquired several loan packages from the Resolution Trust Corp.,
and FDIC (see Note #8) and other privately negotiated contracts. Because the
financial instruments that the Company holds have no established market through
which the Company could liquidate them, the amounts listed below represent the
anticipated amounts to be realized over a period of years.
F-9
</Page>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #7 - Resolution Trust Contracts -Continued-
- ------------------------------------------------
Scheduled below are the disclosures required pursuant to SFAS 107.
<TABLE>
<CAPTION>
Original
Purchase Book Values Expected Returns
Amount 02/28/98 02/28/97 02/28/98 02/29/97
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kansas City Loan Package $ 92,000 $ -0- $ 8,500 $ -0- $ 14,000
Panama City Trailer Park Loan 100,000 -0- 39,000 -0- 69,000
Irvine, California Loan Package 162,223 -0- 59,023 15,000 69,990
Connecticut Mortgage
Certificate 35,050 -0- 12,050 160,000 17,050
California SBA Loan 20,857 -0- 15,857 35,000 25,000
--------------------------------------------------
Subtotal $410,130 $ -0- $134,430 $210,000 $195,040
==================================================
A.R. Eiger Enterprises 100,000 -0- 100,000 -0- 100,000
Total $310,130 $ -0- $ 34,430 $210,000 $ 95,040
==================================================
</TABLE>
Further recoveries of the outstanding loans of the loan packages is uncertain
as to what amount or in what accounting period collection will be made.
NOTE #8 - Notes Receivable
- --------------------------
The Company provided Bridge Loans on building lots and houses. The notes are
all due within twelve months of the date of the indebtedness instrument and
bear interest between 15% to 18% per annum. The Company holds Trust Deed Notes
on the property and has guarantees from the owners. The Company anticipates
receiving its investment of $339,000 and the interest as provided by the notes
during the coming year.
NOTE #9 - Related Party Transactions
- ------------------------------------
A. Commissions
The Company has an agreement with its officers to pay a commission of up to 40%
of the total collected on the Resolution Trust Corporation, and the F.D.I.C.
notes after it has recovered its initial investment. Commission using the same
criteria, of up to 40% may also be paid to other persons, as contracted by the
officers, for amounts collected. In the year ended February 28, 1998,
commissions of $18,240 were paid to the Company President. In the year ended
February 28, 1997, commission of $60,000 was paid to its President. In the
year ended February 29, 1996, commission of $38,200.
F-10
<PAGE>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #9 - Related Party Transactions -Continued-
- ------------------------------------------------
B. Office Facilities
The Company rents space and office incidentals (copy service, secretarial, and
miscellaneous) from the firm of one of its officers. Such space is on a month
to month basis, and may be terminated by either party, with one month notice.
C. Other Related Party Transactions
Stanley DeWaal, an officer and director of the Company, is the general partner
of Center Street Associates, Ltd, ("CSA"), a Utah limited partnership which
owns approximately 37.5 acres of the parcel of unimproved real property which
originally included the 5.58 acres of unimproved real property in which the
Company owns an 80% interest located in Pocatello, Idaho. CSA was one of the
parties, together with the Company and other unrelated parties, which
originally owned a percentage interest in the entire tract which was
reapportioned during the fiscal year ended February 28, 1993.
Eiger Enterprises, Ltd., has currently, and has from time to time, entered into
arrangements with the Company in connection with the purchase of loan packages.
However, the Company has no written contracts in connection with such
arrangements. Eiger Enterprises, Ltd., is a limited partnership the general
partner of which is Eiger, Inc., a Company controlled by Susan Wade. Mrs. Wade
and her husband, Bryce Wade, are deemed the beneficial owners of in excess of
five percent of the outstanding shares of the Company. During the fiscal years
ended February 29, 1996 and February 28, 1995, Eiger Enterprises, Ltd.,
invested a total of $159,034 and $143,748 respectively, in such joint
arrangements. In the current fiscal year the Company sold to Eiger
Enterprises, Ltd., its share of Arizona property for a minimum of $100,000
represented by a note receivable that was paid in full on October 4, 1997.
The Company provides to Mr. Wade a nominal amount of office space at no charge;
the Company has no written contracts for such arrangement
NOTE #10 - Concentration of Credit Risk
- ---------------------------------------
The Company maintains cash savings at several financial institution located in
Utah. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company has no uninsured savings.
F-11
<PAGE>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #11 - Taxes
- ----------------
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
<TABLE>
<CAPTION>
Expiration
Year of Loss Amount Date
-------------------------------------
<C> <C> <C>
1997 $ 39,836 2012
</TABLE>
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issued that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax assets in
future years. Due to the uncertainty as to the utilization of net operating
loss carryforwards an evaluation allowance has been made to the extent of any
tax benefit that net operating losses may generate.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Current Tax Asset Value of Net Operating $ -0- $ -0- $ -0-
Loss Carryforwards at Current Prevailing
Federal Tax Rate -0- 5,976 -0-
Evaluation Allowance -0- ( 5,976) -0-
---------------------------------
Net Tax Asset $ -0- $ -0- $ -0-
Current Income Tax Expense 124,673 -0- -0-
Deferred Income Tax -0- -0- -0-
F-12
</TABLE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, #300
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Consent of Darrell T. Schvaneveldt
Independent Auditor
I consent to the use, of our report dated June 30, 1998, on the financial
statements of First Mortgage Corporation, dated February 28, 1998, included
herein and to the reference made to me.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
April 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000036548
<NAME> FIRST MORTGAGE CORP /UT/
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 298,335
<SECURITIES> 0
<RECEIVABLES> 363,509
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,731
<DEPRECIATION> 0
<TOTAL-ASSETS> 912,543
<CURRENT-LIABILITIES> 125,556
<BONDS> 0
0
0
<COMMON> 51,102
<OTHER-SE> 735,885
<TOTAL-LIABILITY-AND-EQUITY> 912,543
<SALES> 577,383
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 219,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 358,085
<INCOME-TAX> 124,673
<INCOME-CONTINUING> 233,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233,412
<EPS-PRIMARY> .01
<EPS-DILUTED> 00
</TABLE>
