FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: March 31, 1996
Commission File Number: 0-20806
FIRSTMARK CORP.
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maine 01-0389195
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Registrant's telephone number, including area code 207-873-6362
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 of 1934
during the preceding 12 months (or for shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes____X____ No_________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
__________Class__________ ____Outstanding at March 31, 1996____
Common stock, $.20 par value 2,080,634
FIRSTMARK CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Condensed Consolidated Balance Sheet -
March 31, 1996 and June 30, 1995 1
Condensed Consolidated Statement of Operations -
Nine Months Ended March 31, 1996 and 1995 2
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended March 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4-5
Management's Discussion and Analysis of Financial Condition
and Results of Operation 6-7
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports of Form 8-K 8
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
ASSETS
March 31, June 30,
1996 1995
(Unaudited) *
Cash and cash investments $1,288,524 $1,622,016
Accounts receivable 116,370 190,986
Prepaid expenses and other current assets 80,854 67,063
Advances to related parties 34,874 424,169
Real estate and timber investments 1,195,081 1,166,675
Marketable securities, less valuation allowance
Trading account 400,302 932,153
Held for sale 1,414,721 309,948
Numismatic and stamp investments 57,701 57,701
Other investments 2,313,270 1,576,998
Notes receivable 241,423 449,327
Notes receivable from related parties 165,211 129,145
Property and equipment, net of depreciation 162,576 156,561
Deferred income tax charges (45,000) 80,000
Other assets 135,187 165,371
--------- ---------
$7,561,094 $7,328,113
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1996 1995
(Unaudited) *
Liabilities
Accounts payable and accrued expenses $ 113,888 $ 199,738
Income taxes 147,149 89,594
Convertible notes payable 1,035,000 1,035,000
Other liabilities 6,556 38,092
------------ -----------
Total liabilities 1,302,593 1,362,424
------------ -----------
Stockholders' Equity
Common stock 454,209 439,209
Additional paid-in capital, common 3,348,241 3,106,201
Preferred stock 11,800 12,000
Retained earnings 761,985 380,391
Less cost of treasury stock (724,505) (193,898)
Net unrealized loss on marketable equity
securities 163,282 (62,003)
----------- -----------
Total Stockholders' Equity 6,258,501 5,965,589
----------- -----------
$7,561,094 $7,328,113
=========== ===========
*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed
financial statements.
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
1996 1995 1996 1995
Revenues
Commissions and fees $1,557,660 $1,171,512 $ 596,246 $ 397,781
Real estate/timber revenues 353 556,897 0 214,634
Interest and dividend income 105,233 132,642 30,697 43,027
Gain (loss) on securities 92,279 92,257 71,352 44,717
Gain on investments 667,379 (32,486)
Miscellaneous 6,038 1,650 2,820 1,650
---------- ---------- ---------- ----------
2,428,942 1,954,958 668,629 701,809
---------- ---------- ---------- ----------
Expenses
Commissions and fees 729,815 598,217 251,704 228,467
Real estate/timber expenses 417,890 160,976
Writedown of investments 150,000
General and administrative 656,065 509,112 176,315 174,120
Interest expense 64,977 66,387 20,946 21,166
Depreciation/amortization 48,736 48,206 15,658 17,656
---------- ---------- ---------- ----------
1,649,593 1,639,812 464,623 602,385
---------- ---------- ---------- ----------
Income before income taxes 779,349 315,146 204,006 99,424
Income taxes 291,555 119,750 72,955 37,750
---------- ---------- ---------- ----------
Net income $ 487,794 $ 195,396 $ 131,051 $ 61,674
Preferred stock dividends 106,200 107,846 35,400 34,668
----------- ---------- ---------- ----------
Net income available for
common shareholders $ 381,594 $ 87,550 $ 95,651 $ 27,006
=========== ========== ========== ==========
Weighted average number of
shares outstanding 2,152,458 2,238,817 2,136,466 2,241,695
=========== ========== ========== ==========
Primary earnings per share $ .18 $ .04 $ .05 $ .01
=========== ========== ========== ==========
The accompanying notes are an integral part of these condensed
financial statements.
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED
March 31,
1996 1995
Cash flows from operating activities
Net income $ 487,794 $ 195,396
Adjustments to reconcile net income to net
cash provided by operating activities
Adjustments for non-cash items 48,735 450,464
Gain on InterCel (699,865)
Writedown of investments 150,000
Marketable securities - trading account 146,851
Changes in assets and liabilities 575,289 (346,564)
---------- ----------
Net cash provided (used) by operating activities 708,804 299,296
---------- ----------
Cash flows from investing activities
Reductions in other assets (2)
Net decrease (increase) in real estate investments (28,406)
Net decrease (increase) in mkt. sec. - held for sale (94,623) (532,038)
Net decrease (increase) in notes receivable 171,838 200,802
Net decrease (increase) in other investments (886,272) (578,980)
Sale (purchase) of property & equipment (24,564) (2,788)
---------- ----------
Net cash provided (used) by operating activities (862,029) (913,004)
---------- ----------
Cash flows from financing activities
Issuance (purchase) of common stock (33,567) (126,622)
Issuance (purchase) of preferred stock (40,500) 825,874
Preferred stock dividends (106,200) (107,846)
Borrowings (repayments) of debt (164,197)
---------- ----------
Net cash provided (used) by financing activities (180,267) 427,209
---------- ----------
Net change in cash and cash investments (333,492) (186,499)
Cash and cash investments, beginning of period 1,622,016 2,031,419
---------- ----------
Cash and cash investments, end of period $1,288,524 $1,844,920
========== ==========
Cash payments for:
Interest $ 64,977 $ 66,387
Income taxes 212,000 185,900
---------- ----------
$ 276,977 $ 252,287
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Statements
(Unaudited)
1. Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim period.
The results of operations for the nine month period ended March 31, 1996 are
not necessarily indicative of the results to be expected for the full year.
2. Borrowings
The convertible notes payable are due April 1, 1997 and carry interest at
8%. The notes are convertible into common stock of the company at $5.00 per
share. In addition, the Company has the right to call the notes at par value
plus a 5% call premium.
3. Investments
Following is a summary of other investments:
Marketing company $ 681,568
General partner in limited partnerships 185,000
Other 1,596,702
Less reserve (150,000)
-----------
$2,313,270
===========
In January 1994, the Company received a 21% interest in Unitel, which was
spun off by Unity Telephone in conjunction with a merger into InterCel. In
the Unity/InterCel merger, the Company received InterCel shares that were not
recorded because of an outstanding option on the Company's Unity holdings.
On July 21, 1995, the Company and the option holder reached an agreement in
which Firstmark transferred its Unitel stock and a majority of its InterCel
shares in exchange for cash and Firstmark stock owned by the option holder.
The company received 57,236 shares of InterCel and will also retain up to
29,614 shares of InterCel stock that may be released from an acquisition
escrow in May, 1996. A gain of $699,865 was recorded in the first quarter as
a result of the agreement. An additional gain that may exceed $400,000 will be
recorded in May, 1996 when the escrow distribution occurs.
The company has a $681,000 venture capital investment in a marketing company
that has transferred certain of its operations to a new company being
capitalized. Management is in negotiation with the principals of the
marketing company and believes the Company will receive shares of stock in
the newly formed company that are comparable in value to the Company's
investment.
The company has approximately a ten percent general partnership interest in
three limited partnerships.
The company has evaluated its investment portfolio and provided a reserve to
cover its investment in certain venture capital investments. A reserve of
$150,000 was recorded in the first quarter.
4. Preferred Stock
The preferred stock pays dividends at a 6% rate ($2.40 per share). The
preferred stock is convertible into ten shares of common stock at $4.00 per
share, and the warrants issued along with the preferred stock can be
exercised at $6.00 per common share through September 30, 1997. After March,
1996, the Company has the right to call the preferred stock for an amount
equal to 105% of the face amount.
5. Earnings Per Share
Earnings per share are computed by dividing net earnings, after reduction
for preferred stock dividends, by the weighted average number of common
shares and share equivalents assumed outstanding during the year. Common
share equivalents included in the computation represent shares issuable upon
assumed exercise of stock options which would have a dilutive effect.
FIRSTMARK CORP. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed
consolidated financial statements.
Nine Months 1996 vs. 1995
Revenues for the nine months ended March 31, 1996 increased 24% to $2,428,942
from the $1,954,958 recorded during the nine months ended March 31, 1995.
The greatest factor in the increase was the $699,865 gain on investments.
This gain resulted from the receipt of 57,236 InterCel shares as discussed in
Note 3 to the condensed financial statements. An additional 29,614 InterCel
shares are expected to be released from an acquisitions escrow account in
May, 1996.
Gains on securities increased to $92,279 from $92,257 in the prior year.
These gains resulted from the Company's trading program and from the sale of
certain investment securities.
Revenues from commissions and fees increased to 33% to $1,557,660 compared to
$1,171,512 for the prior year. The increase primarily resulted from
marketing of two limited partnerships in which the Company is the general
partner and from fees received in connection with the Company's venture
capital operations.
Interest and dividend income in the 1996 fiscal year decreased 21% to
$105,233 from the $132,642 earned in the 1995 year. The decrease resulted
primarily from lower interest rates and reduced cash investments.
Commission and fees expense increased 22% to $729,815 from $598,217 in the
prior year. The increase resulted primarily from fees paid on the receipt of
InterCel shares discussed above. Such expenses as a percentage of
commissions and fees revenues decreased because fees generated on venture
capital operations did not incur commissions at usual levels.
The writedown of investments resulted from a reevaluation of the Company's
investment portfolio in the first quarter. A reserve of $150,000 was deemed
necessary and was recorded in that quarter.
General and administrative expense was 29% higher than in the prior year.
The increase was primarily due to higher legal cost resulting from the
InterCel settlements discussed above.
Overall, the Company's profitability in 1996 increased over 1995 because of
higher venture capital fees and gains on investments offset by lower activity
in timber operations.
Liquidity and Capital Resources and March 31, 1996
The Company continues to be liquid consistent with its operating history.
March 31, 1996 cash balances decreased to $1,288,524 from the $1,622,016
level and June 30, 1995. Cash was used to make investments in stock and
other venture capital investments. The Company has liquidated most of the
InterCel shares discussed above and replaced them with a few large positions
in the stock of emerging companies. Other investments consist primarily of
venture capital financing which is not liquid, but the Company anticipates
these positions will be liquidated within a three year time frame as the
ventures become more mature.
The notes payable of $1,035,000, issued in April, 1992, are due in April,
1997. At present, the Company intends to repay the convertible notes from
real estate sales and loan repayments as well as disposition of marketable
securities. Dividend payments on the preferred stock are being funded from
current operations. The Company expects to maintain its liquidity and will
pursue additional capital and bank credit lines as necessary. There are
presently no credit lines.
Due to the nature of its operations, the Company does not expect to incur
significant environmental cost.
Three Months 1996 vs. 1995
Revenues for the three months ended March 31, 1996 decreased to $668,629 from
the $701,809 recorded in 1995. The decline resulted from completion of
timber harvesting in June 1995 offset by increases in fees received from
venture capital operations.
Commission costs as a percentage of commissions and fees declined from 57% in
1995 to 42% in 1996. The drop resulted largely because fees earned on
venture capital consulting arrangements did not incur commissions at the
usual levels.
General and administrative expenses increased only 1% to $176,315 over
$174,120 reported in 1995.
Overall, the Company earned more than the comparable period in 1995 as
discussed above.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1996.
Item 6. Exhibits and Reports of Form 8-K
No reports of form 8-K have been filed during the quarter ended March 31,
1996. The exhibits filed as part of this report are listed below.
Exhibit No. Description
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTMARK CORP.
James F. Vigue
______________________________________
(James F. Vigue, Chief Executive Officer, President,
and Chairman of the Board of Directors)
Ivy L. Gilbert
_______________________________________
(Ivy L. Gilbert, Treasurer)
Date: April 7, 1996
