10QSB
10QSB filed by Firstmark Corp.
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, 1997
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 principal 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 March 31, 1997
- -------------------------------------------------------------------------------
Common stock, $.20 par value 2,271,144
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 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. Changes in Securities 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 on Form 8-K 7
<PAGE>
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, 1997 December 31,
(Unaudited) 1996 *
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 1,647,509 $ 1,832,681
Accounts and notes receivables - trade, net 976,179 1,063,926
Accounts and notes receivables - related parties 184,517 210,413
Income taxes receivable 355,327 330,372
Marketable securities:
Trading 297,678 125,750
Held for sale 801,550 900,666
Held to maturity 1,856,978 1,867,343
Venture capital investments, net 1,680,644 1,836,540
Real estate and other investments 1,423,166 1,624,121
Title plant 3,544,243 3,544,243
Property, plant and equipment, net 901,124 1,005,806
Excess of cost over fair value 1,002,732 1,013,696
Deferred tax asset 1,540,808 1,468,518
Other assets 204,917 246,320
------------ ------------
$16,417,372 $17,070,395
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and other liabilities $ 324,923 $ 571,383
Borrowed funds 1,548,198 1,749,435
Reserve for title policy claims 942,121 972,703
Deferred tax liability 1,134,580 1,127,659
------------ ------------
3,949,822 4,421,180
------------ ------------
MANDATORILY REDEEMABLE PREFERRED STOCK
Series B, $0.20 par value - authorized 188,000
shares; issued 40,000 shares (liquidation preference
$8,000,000) 8,750,000 8,750,000
------------ ------------
Stockholders' Equity:
Preferred stock, Series A, $0.20 par value
authorized 250,000 shares; issued 57,000
shares (liquidation preference $2,280,000) 11,400 11,400
Common stock, $0.20 par value - authorized
5,000,000 shares; issued 2,271,144 454,229 454,229
Additional paid-in capital - preferred 2,162,889 2,162,889
Additional paid-in capital - common 3,394,388 3,394,388
Retained earnings (deficit) (1,507,483) (1,143,812)
Treasury stock, at cost - 201,554 shares (818,773) (818,773)
Net unrealized gain (loss) on marketable
equity securities available for sale, net of taxes 20,900 (161,106)
------------ ------------
Total Stockholders' Equity 3,717,550 3,899,215
------------ ------------
$ 16,417,372 $ 17,070,395
============ ============
</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)
Three Months Ended March 31,
1997 1996
----------- -----------
Revenues
Title insurance $ 2,145,729 $ 0
Commissions and fees 5,261 596,246
Investment gains (losses) (145,674) 38,866
Interest and dividends 165,207 30,697
Other revenues 39,187 2,820
----------- -----------
Total revenues 2,209,710 668,629
Expenses
Employee compensation and benefits 1,091,632 70,051
Commissions and fee expense 745,104 251,704
Write-offs of investments 100,000
General and administrative expenses 772,093 142,868
----------- -----------
Total expenses 2,708,829 464,623
----------- -----------
Earnings (losses) before income taxes (499,119) 204,006
Income tax (benefit) expense (169,648) 72,955
----------- -----------
Net earnings (loss) (329,471) 131,051
Preferred stock dividend 34,200 35,400
----------- -----------
Net earnings (loss) applicable to common shares $ (363,671) $ 95,651
=========== ===========
Earnings (loss) per common share $ (.16) $ .05
=========== ===========
Weighted - average number of shares outstanding 2,271,144 2,136,466
=========== ===========
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 March 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from Operating Activities
Net earnings (loss) $ (329,471) $ 131,051
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 59,370 15,657
Write-down of investments 100,000
Collection of income taxes receivable 144,773
Marketable securities - trading account (171,928) 33,318
Changes in assets and liabilities (79,215) (290,166)
----------- -----------
Net cash used by operating activities (276,471) (110,140)
----------- -----------
Cash flows from Investing Activities
Decrease (increase) in real estate 200,955 (5,847)
Decrease in notes receivable 26,665 9,359
Additions to other investments (692,485)
Securities held for sale 99,116 248,529
Purchase of property and equipment (9,330)
----------- -----------
Net cash provided (used) by investing activities 326,736 (449,774)
----------- -----------
Cash flows from Financing Activities
Issuance (purchase) of common stock 121,340
Preferred stock dividends (34,200) (35,400)
Repayments of borrowed funds (201,237)
----------- -----------
Net cash provided (used) by financing activities (235,437) 85,940
----------- -----------
Net change in cash and cash equivalents (185,172) (473,974)
Cash and cash equivalents, beginning of period 1,832,681 1,762,498
----------- -----------
Cash and cash equivalents, end of period $ 1,647,509 $ 1,288,524
=========== ===========
Cash payments for
Interest $ 33,431 $ 20,947
=========== ===========
Income taxes $ 0 $ 49,113
=========== ===========
</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 Financial 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 transition period from
July 1, 1996 to December 31, 1996 of Firstmark Corp. (the "Company"),
as filed with the Securities and Exchange Commission. The December 31,
1996 balance sheet was derived from the 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 results of operations for the three months ended March
31, 1997 are not necessarily indicative of the results to be expected
for the full year.
3. Earnings (Loss) Per Share
Earnings (loss) per share are computed by dividing net earnings (loss),
after reduction for preferred stock dividends, by the weighted average
number of common shares and share equivalents assumed outstanding
during the period. Earnings (loss) per share is equivalent to fully
diluted earnings per share.
<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 title insurance and makes real estate and
venture capital investments. 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 March 31, 1997 include
the results of Southern Capital Corp. while the results of operations for the
three months ended March 31, 1996 does not include the results of Southern
Capital Corp.
RESULTS OF OPERATIONS:
Three Months ended March 31, 1997 Compared to
the Three Months ended March 31, 1996.
Total revenue during the three months ended March 31, 1997 was
approximately $2,210,000, an increase of approximately $1,541,000, compared to
total revenue of $669,000 during the comparable quarter of the prior year. The
increase is attributable to the inclusion of the title insurance revenues of
$2,146,000 in the current quarter (none for the comparable quarter of the prior
year). Title insurance revenues are expected to continue to be the largest
source of revenues in the future. Revenues from commissions and fees decreased
approximately $591,000 during the current quarter primarily due to Management's
decision to close certain business operations, which were not considered
profitable, in the latter part of 1996 and to transfer several subsidiaries to
the former chief financial officer in January 1997 (see "Part I - Recent
Developments" of the Company's Form 10-KSB filed May 5, 1997). Interest and
dividends revenue increased approximately $134,000 to $165,000 for the quarter
ended March 31, 1997 as compared to $31,000 for the comparable quarter of the
prior year. This again was a result of the inclusion of the title insurance
operations and consists primarily of the interest and dividends earned on the
funds held to cover reserves for policyholders. Investment losses amounted to
approximately $146,000 for the quarter ended March 31, 1997 compared to a gain
of $39,000 in the prior year quarter. This was primarily the result of sales of
certain investments, principally small cap stocks, due to Management's continued
review of the Company's investments with an increased focus on their liquidity
and future value.
Operating expenses and general and administrative expenses increased by
approximately $2,144,000 during the current quarter compared to the comparable
quarter of the prior year. This increase also results from the inclusion of the
title insurance operations, which are very labor intensive, in the current
quarter. The writeoff of investments of $100,000 in the quarter ended March 31,
1997 (none in the prior year quarter) relate to Management's decision to provide
an allowance for certain investments, where the ultimate realization of the
Company's investment is in doubt.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and cash equivalents were approximately $1,647,000
at March 31, 1997 as compared to $1,833,000 at December 31, 1996. However, a
significant portion of the cash and cash equivalents (approximately $944,000 at
March 31, 1997 and $1,136,000 at December 31, 1996) was held by a subsidiary,
Southern Title Insurance Corporation ("STIC"), and is subject to certain
regulatory requirements as to use. In addition to the liquidity needed for
operations, the Company redeemed $450,000 of convertible notes payable, which
were due April 21, 1997. Holders of $585,000 of the $1,035,000 of such
convertible notes agreed to extend the maturity date of their indebtedness
evidenced by these notes until March 1, 1999.
The Company intends to satisfy its obligations through cash on hand,
income tax refunds, sales of marketable securities and other assets and payments
received on loans receivable. Management believes that its available and
expected sources of cash will be sufficient to enable the Company to satisfy its
obligations as they come due.
<PAGE>
Reference in made to the "Description of Business - Regulation" and
"Recent Developments" sections included in the Form 10-KSB filed on May 5, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No new litigation or developments related to previously reported litigation for
the quarter ended March 31, 1997.
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
A Special Meeting of Shareholders of the Company (the "Meeting") was
held on February 25, 1997 in Portland, Maine for the purpose of adopting two
amendments to the Company's Articles of Incorporation. As of the record date of
the Meeting, a total of 2,080,634 shares of the Common Stock were outstanding
and entitled to vote.
The first amendment was to increase the amount of the Company's
authorized Common Stock from 5,000,000 to 30,000,000 shares. At the Meeting,
1,372,707 shares were voted in favor of the first amendment, no shares
abstained, 11,252 shares were voted against the first amendment, and 696,675
shares were not voted. These totals represented approval by 66.0% of the total
of the Common Stock issued and outstanding, sufficient for approval by the
Company's shareholders.
The second amendment was to opt the Company out of Section 910 of the
Maine Business Corporation Act. At the Meeting, 1,363,752 shares were voted in
favor of the second amendment, no shares abstained, 4,177 shares were voted
against the second amendment, and 712,705 shares were not voted. These totals
represented approval by 65.5% of the total of the Common Stock issued and
outstanding, sufficient for approval by the Company's shareholders.
The amendments are described in further detail in the Company's
definitive Proxy Statement for a Special Meeting of Stockholders, which was
filed with the Securities and Exchange Commission on February 5, 1997.
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 February 14, 1997, was filed on
February 14, 1997 and reported Item 8 to announce a change in the Company's
fiscal year.
<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.
/s/ Donald V. Cruickshanks
-------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,647,509
<SECURITIES> 2,956,206
<RECEIVABLES> 976,179
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,259,400
<DEPRECIATION> (1,358,276)
<TOTAL-ASSETS> 16,417,372
<CURRENT-LIABILITIES> 0
<BONDS> 1,548,198
8,750,000
11,400
<COMMON> 454,229
<OTHER-SE> 3,251,921
<TOTAL-LIABILITY-AND-EQUITY> 16,417,372
<SALES> 0
<TOTAL-REVENUES> 2,209,710
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,575,398
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 33,431
<INCOME-PRETAX> (499,119)
<INCOME-TAX> (169,648)
<INCOME-CONTINUING> (329,471)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (329,471)
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
