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, 1999
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
September 27, 1999 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.
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 11
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.
1
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 12% 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.
2
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 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.
3
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, 1999, 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 September 27, 1999, 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.
4
Item 6. Selected Financial Data.
- ---------------------------------
<TABLE>
02/28/99 02/28/98 02/28/97 02/29/96 02/28/95
-------------------------------------------- -----------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenue $ 460,044 $ 577,383 $ 59,908 $ 98,161 $ 131,529
Operating Expenses 195,936 219,298 96,744 87,607 84,118
Income from Operations 264,108 358,085 ( 39,836) 10,554 47,111
Interest (Loss) Expenses 163 -0- 3,753 1,120 4,287
Provisions for Taxes ( 96,510) (124,673) ( 4,741) 3,419 9,422
Net Income (Loss) 167,598 233,412 ( 35,095) 9,654 37,689
Earnings Per Share 0.03 0.01 0.00 0.00 0.00
Shares Outstanding 51,101,680 51,101,680 51,101,680 51,101,680 51,101,608
Balance Sheet Data
Cash & Cash Equivalent 348,566 498,335 470,153 340,577 435,781
Total Assets $1,049,104 $ 912,543 $ 553,575 $ 730,367 $ 761,587
Total Debt 94,519 125,556 -0- 141,697 182,571
Shareholders' Equity 954,585 789,987 553,575 588,670 579,016
</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.
5
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 ont 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, 1999 and
1998, the Company had working capital of $954,585 and $786,987 respectively.
Cash and cash equivalents balances were $348,561 and $498,335 respectively.
The Company's growth in working capital at February 28, 1999, was attributable
to its operations. Operations accounted for all increases in cash flows for
the years ended February 29, 1999 and 1998.
The Company believes that cash from operating activities will be sufficient
to finance its activities for its fiscal year ending February 28, 2000.
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, 1999 and 1998 F-3
Statements of Operations for the Fiscal Years Ended
February 28, 1999 and 1998 F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
- -------------------------------------------------------------------------
None.
6
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 54.
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 64.
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 65.
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, 1999, 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.
7
Item 11. Executive Compensation.
- ----------------------------------
The following table sets forth the aggregate executive compensation paid by
the Company for the fiscal years ended February 28, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------- ------------------------
Restr- All
Name icted Other
& Principal Stock Options/ LTIP Compen-
Positions Year Salary Bonus Compensation Award(s) SAR(s) Payouts sation
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William S. 1999 - - $162,200(1) - - - -
Greaves, 1998 - - 182,000(1) - - - -
President 1997 - - 60,500(1) - - - -
- -------------------------------------------------------------------------------------
</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 $100,000 for the fiscal years ended February 28, 1999, 1998 and
1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The following table sets forth certain information concerning the stock
ownership as of August 31, 1995, of (I) each person who is known to the
Company to be the beneficial owner of more than 5 percent of the Company's
Common Stock; (ii) all directors; (iii) each of the executive officers; and
(iv) directors and executive officers of the Company as a group:
8
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- ----------------- -------------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock William S. Greaves 25,601,100 50.08%
($.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%
($.001 par value) 2205 Pheasant Way
Salt Lake City, UT 84121
Common Stock Directors and Executive 25,626,100 50.12%
($.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.
9
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.
10
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
- ----------- ------------------------------------------ ------
<S> <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.
11
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: September 27, 1999 --------------------------
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.
/S/ William S. Greaves
By:----------------------------------- Date: September 27, 1999
William S. Greaves, Director, Chief
Financial Officer and Principal
Accounting Officer
/S/ Stanley R. DeWaal
By:----------------------------------
Stanley R. DeWaal, Director
/S/ Donald L. Smith
By:----------------------------------
Donald L. Smith, Director
12
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, 1999. 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,
1999.
13
First Mortgage Corporation
Financial Statements
February 28, 1999
&
February 28, 1998
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #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, 1999 and 1998, and the related statements
of operations, stockholders' equity and cash flows for the years ended
February 28, 1999, 1998, and 1997. 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, 1999 and 1998, and the results of its
operations and its cash flows for the years ended February 28, 1999, 1998
and 1997, in conformity with generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
July 7, 1999
F-2
First Mortgage Corporation
Balance Sheets
February 28, 1999 and 1998
<TABLE>
<CAPTION>
February February
28, 1999 28, 1998
------------ ------------
<S> <C> <C>
Assets
Current Assets
- --------------
Cash in Bank $ 48,566 $ 198,335
Cash in Savings 100,000 100,000
Other Receivables 3,922 9,509
Contracts Receivable 2,500 15,000
Notes Receivable 594,000 339,000
------------ ------------
Total Current Assets 748,988 661,844
Fixed Assets
- ------------
Office Equipment 1,818 2,261
Leasehold Improvements 330 470
------------ ------------
Total Fixed Assets 2,148 2,731
Other Assets
- ------------
Investment 50,000 -0-
Certificate of Deposit 200,000 200,000
Land 47,968 47,968
------------ ------------
Total Other Assets 297,968 247,968
------------ ------------
Total Assets $ 1,049,104 $ 912,543
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
First Mortgage Corporation
Balance Sheets -Continued-
February 28, 1999 & 1998
<TABLE>
<CAPTION>
February February
28, 1999 28, 1998
------------ ------------
<S> <C> <C>
Liabilities And Stockholders' Equity
Current Liabilities
- -------------------
Accounts Payable $ 592 $ 883
Taxes Payable 93,927 124,673
------------ ------------
Total Current Liabilities 94,519 125,556
Stockholders' Equity
- --------------------
Common Stock, 100,000,000 Shares Authorized
at $0.001 Par Value;
51,101,680 Shares Issued and Outstanding 51,102 51,102
Capital in Excess of Par Value 242,697 242,697
Retained Earnings 660,786 493,188
------------ ------------
Total Stockholders' Equity 954,585 786,987
------------ ------------
Total Liabilities and
Stockholders' Equity $ 1,049,104 $ 912,543
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
First Mortgage Corporation
Statements of Operations
For the Fiscal Years Ended
February 28, 1999, 1998 & 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
- --------
Mortgage Recovery $ 360,500 $ 543,070 $ 35,000
Interest 92,604 31,035 19,849
Miscellaneous 3,381 1,802 -0-
Bad Debt Recovery 3,559 1,476 2,059
------------ ------------ ------------
Total Revenues 460,044 577,383 56,908
Expenses
- --------
Commission Expense 162,200 182,400 60,800
Interest Expense 163 -0- 3,753
Office Expense 8,861 6,002 6,272
Rents 8,700 8,700 9,276
Professional Fees 5,676 4,931 3,551
Telephone 2,868 2,932 4,031
Depreciation 583 538 195
Land Expense (Note #6) 2,868 757 1,000
Travel 3,125 12,036 7,379
Taxes 892 1,002 487
------------ ------------ ------------
Total Expenses 195,936 219,298 96,744
------------ ------------ ------------
Income Before Taxes 264,108 358,085 ( 39,836)
Income Taxes ( 96,510) ( 124,673) 4,741
------------ ------------ ------------
Net Income (Loss) After Taxes $ 167,598 $ 233,412 ($ 35,095)
============ ============ ============
Earnings (Loss) Per Share $ .03 $ .05 $ .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
First Mortgage Corporation
Statements of Stockholders' Equity
From March 1, 1996 to February 28, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid in Retained
Shares Amount Capital Earnings
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
March 1, 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
Income for Year Ended
February 28, 1998 233,412
-----------------------------------------------------
Balance,
February 28, 1998 51,101,680 51,102 242,697 493,188
Income for Year Ended
February 28, 1999 167,598
-----------------------------------------------------
Balance, February 28, 1999 51,101,680 $ 51,102 $ 242,697 $ 60,786
=====================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
First Mortgage Corporation
Statements of Cash Flows
For the Fiscal Years Ended
February 28, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Income (Loss) $ 167,598 $ 233,412 ($ 35,095)
Adjustments to Reconcile Net Income or
(Loss) to Operating Activities:
Depreciation 583 538 195
Changes in Operating Assets & Liabilities:
(Increase) in Prepaid Taxes -0- -0- ( 2,614)
(Increase) Decrease in Other Receivables 5,587 ( 9,509) -0-
(Increase) Decrease in Accounts Receivable -0- -0- 100,000
(Decrease) Increase in Accounts Payable ( 291) 883 ( 1,697)
Increase (Decrease) in Taxes Payable ( 30,746) 124,673 -0-
(Increase) Decrease in Prepaid Taxes -0- 4,742 -0-
------------ ------------ ------------
Net Cash (Used) Provided by
Operating Activities 142,731 354,739 60,789
Cash Flows from Investing Activities
- ------------------------------------
Purchase of Long Term CD -0- ( 200,000) -0-
Purchase of Land -0- ( 4,328) ( 17,224)
Cash Received on Contracts 45,000 34,430 229,200
Investment in Contracts ( 337,500) ( 354,000) ( 3,189)
Purchase of Office Equipment -0- ( 2,659) -0-
------------ ------------ ------------
Net Cash Provided by
Investing Activities 292,500 ( 526,557) 208,787
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
First Mortgage Corporation
Statements of Cash Flows -Continued-
For the Fiscal Years Ended
February 28, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities
- ------------------------------------
(Decrease) Increase in Notes Payable -0- -0- ( 140,000)
------------ ------------ ------------
Net Cash Provided by
Financing Activities -0- -0- ( 140,000)
------------ ------------ ------------
Increase (Decrease) in Cash ( 149,769) ( 171,818) 129,576
------------ ------------ ------------
Cash at Beginning of Year 298,335 470,153 340,577
------------ ------------ ------------
Cash at End of Year $ 148,566 $ 298,335 $ 470,153
============ ============ ============
Expense Disclosures
- -------------------
Interest $ 163 $ -0- $ 3,753
Taxes 91,635 124,673 -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
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. 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.
F-9
First Mortgage Corporation
Notes to Financial Statements -Continued-
NOTE #5 - Depreciation of Fixed Assets
- --------------------------------------
The following is a summary of leasehold improvements and office equipment
at cost, accumulated depreciation, and depreciation expense.
<TABLE>
<CAPTION>
Accumulated Depreciation
Cost Depreciation Expenses
Assets 1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leasehold Improvements $ 1,400 $ 1,400 $ 1,070 $ 930 $ 140 $ 140
Office Equipment 5,339 5,339 3,521 3,078 443 398
----------------------------------------------------
Total $ 6,739 $ 6,739 $ 4,591 $ 4,008 $ 583 $ 538
====================================================
</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> 1999 1998 1997
------------------------------
<S> <C> <C> <C>
Taxes $ 510 $ 508 $ 487
Engineering & Legal -0- 248 -0-
Management -0- -0- 1,000
------------------------------
Total Expenses $ 510 $ 756 $ 1,487
==============================
</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 28, 1999.
During the year ended February 28, 1999, 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 $105,000 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-10
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>
Original Expected
Purchase Book Values Returns
Amount 02/28/98 02/28/97 02/28/99
---------------------------------------
<S> <C> <C> <C> <C>
Irvine, California Loan Package $162,223 $ -0- $ 59,023 $ 15,000
Connecticut Mortgage Certificate 35,050 -0- 12,050 35,000
California SBA Loan 20,857 -0- 15,857 7,000
Denver Company Loan Package 100,000 -0- -0- 5,000
San Jose, California Loan Package 115,000 -0- -0- 43,000
---------------------------------------
Total $433,130 $ -0- $ 86,930 $105,000
=======================================
</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 12% 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 $594,000 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, 1999, commissions of $162,200 were paid to the Company
President. In the year ended February 28, 1998, commission of $182,400 was
paid to its President. In the year ended February 28, 1997, commission of
$60,800, was paid to its President.
F-11
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.
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 two financial institutions located
in Utah. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company currently has $100,000
at one financial institutions in excess of the insured amounts.
F-12
First Mortgage Corporation
Notes to Financial Statements -Continued-
NOTE #11 - Taxes
- ----------------
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.
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Current Tax Asset Value of Net Operating $ -0- $ -0-
Loss Carryforwards at Current Prevailing
Federal Tax Rate -0- -0-
---------- ----------
Evaluation Allowance -0- -0-
Net Tax Asset $ -0- $ -0-
Current Income Tax Expense 96,510 124,673
Deferred Income Tax -0- -0-
</TABLE>
NOTE #12 - Y2K Compliance
- -------------------------
The Company does not make use of significant computer programs susceptible
to any anticipated Y2Kproblems. The Company believes the banks it
currently uses are Y2K compliant.
NOTE #13 - Subsequent Events
- ----------------------------
Subsequent to its year end the Company collected in full the two "Bridge
Loans" notes that were past due and foreclosed on the third. The Company
now has possession of the property and is actively pursuing sales
opportunities.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000036548
<NAME> FIRST MORTGAGE CORP.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-31-1998
<PERIOD-END> FEB-28-1999
<CASH> 148,566
<SECURITIES> 0
<RECEIVABLES> 600,422
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 748,988
<PP&E> 6,739
<DEPRECIATION> 4,591
<TOTAL-ASSETS> 1,049,104
<CURRENT-LIABILITIES> 94,519
<BONDS> 0
0
0
<COMMON> 51,102
<OTHER-SE> 903,483
<TOTAL-LIABILITY-AND-EQUITY> 1,049,104
<SALES> 460,044
<TOTAL-REVENUES> 460,044
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 195,936
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 264,108
<INCOME-TAX> 96,510
<INCOME-CONTINUING> 167,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,598
<EPS-BASIC> .03
<EPS-DILUTED> 0
</TABLE>
