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: September 30, 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.)
222 Kennedy Memorial Drive, Waterville, ME 04901
(Address of principle executive offices) (Zip Code)
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 September 30, 1996
- --------------------------------------------------------------------------------
Common stock, $.20 par value 2,068,990
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Condensed Consolidated Balance Sheet -
September 30, 1996 and June 30, 1996 1
Condensed Consolidated Statement of Operations
Three Months Ended September 30, 1996 and 1995 2
Condensed Consolidated Statement of Cash Flows -
Three Months Ended September 30, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-6
Part II Other Information
Item 1. Legal Proceedings 7
Item 2. Submission of Matters to a Vote of Security
Holders 7
Item 3. Defaults upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports of Form 8-K 7
<PAGE>
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1996 1996
(Unaudited) *
<S> <C> <C>
Cash and cash investments $ 1,757,217 $ 1,707,327
Accounts and Notes Receivables - trade net 1,085,595 1,285,212
Accounts and Notes Receivables - related parties 235,365 263,051
Income taxes receivables 537,263 436,910
Marketable securities:
Trading 348,108 386,470
Held for Sale 1,176,239 1,355,376
Held to Maturity 1,997,557 2,000,536
Venture capital investments, net 2,174,638 2,026,176
Real estate and other investments 1,628,218 1,611,455
Title plant 3,544,243 3,544,243
Property, plant and equipment, net 1,096,124 1,130,572
Excess of cost over fair value 1,115,221 1,111,777
Deferred tax asset 829,591 829,591
Other assets 178,239 263,361
--------- ---------
$ 17,703,618 $ 17,952,057
= = = = = = = = = == = = = = =
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities
Accounts payable and other liabilities $ 348,262 $ 422,120
Borrowed funds 1,861,795 1,885,561
Reserve for title policy claims 953,691 944,754
Deferred tax liability 937,573 931,817
--------- ---------
Total Liabilities $ 4,101,321 $ 4,184,252
------------- --------------
Stockholders' Equity
Preferred stock, Series A, $0.20 par value
authorized 250,000 shares;
issued 57,000 and 60,000 shares, respectively,
(liquidation preference $2,280,000) 11,400 11,400
Preferred stock, Series B, $0.20 par value -
authorized 188,000 shares; issued 40,000 shares 8,000 8,000
Common stock, $0.20 par value - authorized
5,000,000 shares; issued 2,271,044 and 2,196,040
shares, respectively 454,209 454,209
Additional paid-in capital - preferred 10,904,889 10,904,889
Additional paid-in capital - common 3,393,992 3,393,992
Retained earnings (deficit) (418,976) (234,852)
Treasury stock, at cost - 201,554 and 45,770
shares, respectively (818,773) (818,773)
Net unrealized gain (loss) on marketable
equity securities held for sale 67,556 48,940
-------- --------
Total Stockholders' Equity 13,602,297 13,767,805
------------ ----------
$ 17,703,618 $ 17,952,057
= = = = = = = = = = = = = = = = =
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
-------------------------------
<S> <C> <C>
Revenues
Commissions and fees $ 285,902 $ 412,289
Title insurance 2,915,185 0
Investment gains (93,641) 821,020
Interest and dividends 91,555 42,662
Other revenues 352 572
----- -----
Total revenues 3,199,353 1,276,543
----------- -----------
Expenses
Employee compensation and benefits 2,523,113 336,475
Write-offs of loans and investments 0 150,000
General and administrative expenses 894,633 209,561
Interest expense 31,884 21,446
-------- --------
Total expenses 3,449,630 717,482
----------- ---------
Earnings (losses) before income taxes (250,277) 559,061
Income tax (benefit) expense (100,353) 212,400
----------- ---------
Net earnings (loss) (149,924) 346,661
Preferred stock dividend 34,200 36,000
-------- --------
Net earnings (loss) available for common shares (184,124) 310,661
= = = = = = = = = = = =
Earnings (loss) per share (.089) .14
= = = = = = = = = = = =
Weighted number of shares and
equivalents outstanding 2,068,990 2,178,952
= = = = = = = = = = = =
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from Operating Activities
Net income (loss) $ (149,924) $ 346,661
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 78,826 16,267
Deferred Taxes 5,756
Gain on InterCel (699,865)
Loss on sales of investments 93,641
Unrealized gains (18,616) (78,698)
Write-down of investments 150,000
Net (increase) decrease in notes receivable 49,583 (276,996)
Marketable securities - trading account 38,362 117,253
Collections on accounts receivable 177,720 101,266
Change in other assets 85,122 413,379
Decrease in payables (64,921) (121,047)
Increase (decrease) in income taxes payable 122,400
Increase in income taxes receivables (100,353)
-------- -------
Net cash provided (used) by operating activities 195,196 90,620
--------- ------
Cash flows from Investing Activities
Decrease (increase) in real estate (16,763) (8,700)
Acquisition costs (23,357)
Additions to other investments (148,462) (200,000)
Securities held for investments 125,707 111,363
Purchase of property and equipment (24,465) (6,348)
---------- ---------
Net cash used by investing activities (87,340) (103,685)
---------- -----------
Cash flows from Financing Activities
Issuance (purchase) of common stock 35,508
Payments on other liabilities (11,119)
Preferred stock dividends (34,200) (36,000)
Borrowings (repayments) of debt (23,766)
Net cash provided (used) by financing activities (57,966) (11,611)
---------- ----------
Net change in cash and cash investments 49,890 (24,676)
Cash and cash investments, beginning of period 1,707,327 1,622,016
----------- -----------
Cash and cash investments, end of period 1,757,217 1,597,340
----------- -----------
Cash payments for
Interest 31,884 21,446
Income taxes 0 90,000
- --------
$31,884 $111,446
= = = = = = = = = = = =
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
<PAGE>
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Statements
(Unaudited)
BASIS OF PRESENTATION
1. The accompanying unaudited consolidated financial statements, which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Annual Report on Form
10-KSB for the year ended June 30, 1996 of Firstmark Corp (the "Company"),
as filed with the Securities and Exchange Commission. The June 30, 1996
balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted
accounting principles.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The result of operations for the three months ended September
30, 1996 are not necessarily indicative of the results to be expected for
the full year.
3. 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.
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is engaged in venture capital, consulting services and title
insurance. The Company invests its capital in and provides bridge loans to
emerging growth or startup companies, and provides financial consulting services
to individuals, institutions, and corporations. In June 1996, Southern Capital
Corp. was merged into Southern Capital Acquisition Corporation which was
acquired by The Company. Southern Capital Corp. was engaged in venture capital
investments and owned Southern Title Insurance Corporation, a title insurance
underwriter. The Company's results of operations for three months ended
September 30, 1996 include the results of Southern Capital Corp. while the
results of operations for the three months ended September 30, 1995 does not
include the results of Southern Capital Corp.
RESULTS OF OPERATIONS:
Three months ended September 30, 1996 compared to
three months ended September 30, 1995.
Total revenue during the three months ended September 30, 1996 was
$3,199,353, an increase of $1,992,810, compared to total revenue of $1,276,543
during the prior comparable quarter. The inclusion of the title insurance
revenues of $2,915,185 compared to none for the prior comparable quarter was the
major factor causing the increase in revenues. Title Insurance fees are expected
to become the largest source of revenues in the future. Interest and dividends
revenue increased $48,933 to $91,555 for the quarter ended September 30, 1996 as
compared to $42,662 for the comparable prior quarter. This again was a result of
the addition of the Title Insurance Operations and the interest and dividends
earned on the funds held to cover reserves for policyholder's. Investment
gains/(losses) decreased $914,661 to a loss of $91,555 for the quarter ended
September 30, 1996 compared to a gain of $821,020 for the comparable prior
quarter. This was a result of two factors. In July 1995 the Company was able to
reach agreements with all the interested parties concerning shares of Intercell
held in an acquisitions escrow account and was able to report a gain of $648,708
as a result of this agreement. An additional gain will be reported in March 1997
when the escrow distribution occurs. The second factor results from losses for
the first quarter in the securities held for trading. This is a result of a drop
in value of several stocks of micro-cap companies which did not participate in
the recent stockmarket rally. Commission and fee income decreased $126,387 to
$285,902 for the quarter ended September 30, 1996 as compared to $412,289 for
the comparable prior quarter. This is a result of fewer venture capital deals
closing during the quarter and a decrease in the level of activity in the
financial planning business.
Total operating expenses increased $2,732,148 to $3,449,630 for the quarter
ended September 30, 1996 compared to operating expenses of $717,482 during the
prior comparable quarter. Employees compensation and benefits increased
$2,186,638 to $2,523,113 for the three months ended September 30, 1996 as
compared to $336,475 for the comparable prior period. This increase is mainly a
result of the Southern Capital acquisition as the title insurance operations is
very labor intensive. General and administrative expenses increased $685,072 to
$894,633 for the quarter ended September 30, 1996 compared to $209,561. The
general and administrative expenses are above the 1995 levels because of the
operations of the Title Company which were not in the 1995 comparable balances.
The Title Company operates in 14 different offices and thus expenses will be
higher. The writeoff of loans and investments decreased $150,000 to 0 for the
quarter ended September 30, 1996 as compared to the comparable period last year.
No new writeoffs were deemed necessary by management during the quarter.
Interest expense increased by $10,438 from to $31,884 for the quarter ended
September 30, 1996 as compared to the prior comparable quarter. This is a result
of the additional borrowed funds coming as part of the Southern Capital
Acquisition.
Overall income decreased by $496,585 to a loss of $149,924 for the quarter ended
September 30, 1996 as compared to $346,661 income for the prior comparable
quarter. This was mainly a result of the quarter ended September 30, 1995 having
the Unicel gain of $699,865.
LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1996
The Company's cash level is at $1,750,000 at September 30, 1996 up $50,000
from the June 30, 1996 level. The Company continues to focus on maintaining and
in fact increasing its liquidity by converting real estate and other investments
to cash in a timely manner. The Company has the following obligations coming due
in fiscal year 1997:
Convertible notes issued April 1992 due April 1997 $ 1,035,000
Advance from stockholder due January 1997 100,000
Bank line of credit due April 1997 400,000
Management is currently working on extensions of the current obligations and on
extending terms on an existing unused line of credit.
Due to the nature of its operations, the Company does not expect to incur
significant environmental costs. Its capital resources are not expected to be
affected significantly by the current accounting pronouncements regarding
accounting of loans and accounting for investments in debt and equity securities
and derivatives.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No new litigation or developments related to previously reported litigation for
the quarter ended September 30, 1996.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
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
September 30, 1996.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports of Form 8-K
(A) Exhibits
NONE
(B) Reports on Form 8-K
A current report on Form 8-K, dated August 19, 1996, was filed on
August 21, 1996 and reported Item 4 to announce a change in the Company's
certifying accountant.
An amendment to a current report on Form 8-K/A was filed on August 22,
1996 and reported an amended Item 7 to include the financial statements of
Southern Capital Corp., a Virginia corporation ("SCC"). The Form 8-K/A amended a
current report on Form 8-K, dated June 7, 1996, which announced the merger of
SCC into Southern Capital Acquisition Corp., a Virginia corporation and
wholly-owned subsidiary of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTMARK CORP.
/s/ James F. Vigue
--------------------------------------
(James F. Vigue, Chief Executive Officer, President
and Chairman of the Board of Directors)
Date November 14, 1996 /s/ Ivy L. Gilbert
--------------------------------------
(Ivy L. Gilbert, Treasurer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,757,217
<SECURITIES> 3,521,904
<RECEIVABLES> 1,280,595
<ALLOWANCES> 195,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,533,433
<DEPRECIATION> 1,457,309
<TOTAL-ASSETS> 17,703,618
<CURRENT-LIABILITIES> 0
<BONDS> 1,861,795
0
19,400
<COMMON> 454,209
<OTHER-SE> 13,128,688
<TOTAL-LIABILITY-AND-EQUITY> 17,703,618
<SALES> 0
<TOTAL-REVENUES> 3,199,353
<CGS> 0
<TOTAL-COSTS> 3,417,746
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,884
<INCOME-PRETAX> (250,277)
<INCOME-TAX> (100,353)
<INCOME-CONTINUING> (149,924)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149,924)
<EPS-PRIMARY> (.089)
<EPS-DILUTED> 0
</TABLE>
