FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 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 (Zip Code)
offices)
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, 1997
- -------------------------------------------------------------------------------
Common stock, $.20 par value 2,069,590
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 and 1996 and
Three Months Ended September 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 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
<PAGE>
PART I - FINANCIAL INFORMATION
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
September 30, 1997 December 31,
(Unaudited) 1996 *
<S> <C> <C>
Cash and cash equivalents $ 2,205,705 $ 1,832,681
Accounts and notes receivables - trade, net 1,078,635 1,063,926
Accounts and notes receivables - related parties 174,628 210,413
Income taxes receivable 130,015 330,372
Marketable securities:
Trading 66,806 125,750
Held for sale 489,114 900,666
Held to maturity 1,698,686 1,867,343
Venture capital investments, net 1,697,318 1,836,540
Real estate and other investments 1,047,221 1,624,121
Title plant 3,563,008 3,544,243
Property, plant and equipment, net 864,275 1,005,806
Excess of cost over fair value 981,120 1,013,696
Deferred tax asset 1,540,808 1,468,518
Other assets 173,339 246,320
------------ ------------
$ 15,710,678 $ 17,070,395
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and other liabilities $ 515,566 $ 571,383
Borrowed funds 1,073,398 1,749,435
Reserve for title policy claims 842,055 972,703
Deferred tax liability 1,137,200 1,127,659
------------ ------------
Total Liabilities 3,568,219 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
30,000,000 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) (1,625,926) (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 (185,748) (161,106)
------------ ------------
Total Stockholders' Equity 3,392,459 3,899,215
------------ ------------
$ 15,710,678 $ 17,070,395
============ ============
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
1
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Title insurance $ 2,961,204 $ 2,915,185 $ 7,662,828 $ 3,718,220
Commissions and fees 0 285,902 5,261 1,053,877
Investment gains (losses) 112,582 (93,641) 361,143 (153,286)
Interest and dividends 85,062 91,555 307,017 190,122
Other revenues 99,687 352 198,016 29,007
----------- ----------- ----------- -----------
Total revenues 3,258,535 3,199,353 8,534,265 4,837,940
----------- ----------- ----------- -----------
Expenses
Employee compensation and benefits 1,133,395 997,783 3,342,610 1,675,830
Commissions and fee expense 980,000 1,525,330 2,616,937 2,319,585
Write-offs of investments 0 0 100,000 1,099,347
General and administrative expenses 1,118,340 926,517 2,858,224 1,324,364
----------- ----------- ----------- -----------
Total expenses 3,231,735 3,449,630 8,917,771 6,419,126
----------- ----------- ----------- -----------
Earnings (losses) before income taxes 26,800 (250,277) (383,506) (1,581,186)
Income tax (benefit) expense 9,112 (100,353) (130,392) (600,878)
----------- ----------- ----------- -----------
Net earnings (loss) 17,688 (149,924) (253,114) (980,308)
Preferred stock dividends 34,200 34,200 229,000 105,000
----------- ----------- ----------- -----------
Net earnings (loss) applicable to
common shares $ (16,512) $ (184,124) $ (482,114) $(1,085,308)
=========== =========== =========== ===========
Earnings (loss) per common share $ (.01) $ (.09) $ (.23) $ (.52)
=========== =========== =========== ===========
Weighted-average number of shares
outstanding 2,069,590 2,074,191 2,069,590 2,077,621
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
2
<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1997 1996
<S> <C> <C>
Cash flows from Operating Activities
Net earnings (loss) $ (253,114) $ (980,308)
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on receipt and sale of Intercel shares (479,465) 0
Deferred income taxes (130,392) (270,527)
Depreciation and amortization 175,751 131,407
Write-down of investments 100,000 1,099,347
Collection of income taxes receivable 303,385 0
Marketable securities - trading account (58,944) 85,511
Changes in assets and liabilities 208,026 (432,335)
----------- -----------
Net cash used by operating activities (134,753) (366,905)
----------- -----------
Cash flows from Investing Activities
Acquisition of business, net of cash acquired 0 1,012,322
Acquisition costs 0 (52,355)
Decrease in real estate 526,199 0
Decrease (increase) in notes receivable 122,984 (16,048)
(Additions to) reductions in other investments 139,222 (1,677,260)
Proceeds from sale of securities held for sale 658,629 1,323,334
Purchase of property and equipment (34,220) (56,966)
----------- -----------
Net cash provided by investing activities 1,412,814 533,027
----------- -----------
Cash flows from Financing Activities
Issuance (purchase) of common stock 0 154,907
Purchase of preferred stock 0 (81,000)
Purchase of treasury stock 0 (233,625)
Preferred stock dividends (229,000) (105,000)
Proceeds from borrowings 150,000 158,084
Repayments of borrowed funds (826,037) (64,769)
----------- -----------
Net cash used by financing activities (905,037) (171,403)
----------- -----------
Net change in cash and cash equivalents 373,024 (5,281)
Cash and cash equivalents, beginning of period 1,832,681 1,762,498
----------- -----------
Cash and cash equivalents, end of period $ 2,205,705 $ 1,757,217
=========== ===========
Cash payments for:
Interest $ 83,707 $ 62,416
=========== ===========
Income taxes $ 0 $ 209,113
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<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 nine months ended September
30, 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.
4
<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 the nine months ended September 30, 1997
include the results of Southern Capital Corp. while the results of operations
for the nine months ended September 30, 1996 include the results of Southern
Capital Corp. only for the period from June 7, 1996.
RESULTS OF OPERATIONS:
Nine Months ended September 30, 1997 Compared
to the Nine Months ended September 30, 1996
Total revenue during the nine months ended September 30, 1997 was
approximately $8,534,000, an increase of approximately $3,696,000, compared to
total revenue of $4,838,000 during the comparable nine-month period of the prior
year. The increase is attributable to the inclusion of the title insurance
revenues of $7,663,000 in the current nine-month period as compared to
$3,718,000 in the comparable period 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 $1,049,000 during the
current nine-month period 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 in exchange for the surrender of certain employment and
compensation benefits (see "Part I Recent Developments" of the Company's Form
10-KSB filed May 5, 1997). Interest and dividends revenue increased
approximately $117,000 to $307,000 for the nine-month period ended September 30,
1997 as compared to $190,000 for the comparable period 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. Net investment gains amounted to approximately
$361,000 for the nine-month period ended September 30, 1997 compared to net
investment losses of $153,000 in the prior year period. This was primarily the
result of a gain (approximately $381,000) recognized on the receipt of shares of
Intercel stock previously held in escrow and an additional gain of approximately
$98,000 when these and other shares of Intercel were ultimately sold, which were
partially offset by losses on the 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 $3,498,000 during the current nine-month period compared to the
comparable period of the prior year. This increase also results from the
inclusion of the title insurance operations, which are very labor intensive, for
the full nine-month period as compared to a period of less than four months in
the comparable period of the prior year. Writeoffs of approximately $1,099,000
in the prior year period relate principally to investments in venture capital
investments and loans in several startup companies, where the future value and
collectibility of such amounts were uncertain. The writeoff of investments of
$100,000 in the current period ended Septembere 30, 1997 relates to Management's
decision to continue to provide an allowance for certain investments, where the
ultimate realization of the Company's investment is in doubt.
Three Months ended September 30, 1997 Compared
to the Three Months ended September 30, 1996
Total revenue during the three months ended September 30, 1997 was
approximately $3,258,000, an increase of approximately $59,000, compared to
total revenue of $3,199,000 during the comparable quarter of the prior year.
Title insurance revenues increased approximately $46,000 to $2,961,000 in the
current quarter as compared to $2,915,000 in the comparable quarter of the prior
year. Revenues from commissions and fees decreased approximately $286,000 during
the current quarter primarily due to Management's decision to close certain
5
<PAGE>
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 amounted to approximately
$85,000 in the current quarter ended September 30, 1997 compared to $92,000 for
the comparable quarter of the prior year. Net investment gains amounted to
approximately $113,000 for the current quarter compared to net investment losses
of $94,000 in the prior year quarter. This was primarily the result of the gain
(approximately $98,000) on sale of shares of Intercel discussed above.
Operating expenses and general and administrative expenses decreased by
approximately $218,000 during the current quarter compared to the comparable
quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and cash equivalents were approximately $2,206,000 at
September 30, 1997 as compared to $1,833,000 at December 31, 1996. However, a
significant portion of the cash and cash equivalents (approximately $1,291,000
at September 30, 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.
The Company intends to satisfy its obligations using 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. Additionally, the Company has an available line of
credit of $500,000 as of September 30, 1997, for which no borrowings are
outstanding at that date.
Effective October 22, 1997, all of the issued and outstanding shares of the
Company's Series B Cumulative Non Voting Preferred Stock were converted into
shares of the Company's Common Stock. The effect of the conversion was to
increase stockholders' equity by $8,750,000 and increase the number of the
issued and outstanding shares of the Company's Common Stock by 3,230,286 shares.
Reference is made to the "Description of Business - Regulation" and "Recent
Developments" sections included in the Form 10-KSB filed on May 5, 1997.
6
<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/ Donald V. Cruickshanks
---------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
/s/ Ronald C. Britt
---------------------------------------
Ronald C. Britt
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,205,705
<SECURITIES> 2,254,606
<RECEIVABLES> 1,078,635
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,315,212
<DEPRECIATION> (1,450,937)
<TOTAL-ASSETS> 15,710,678
<CURRENT-LIABILITIES> 0
<BONDS> 1,073,398
8,750,000
11,400
<COMMON> 454,229
<OTHER-SE> 2,926,830
<TOTAL-LIABILITY-AND-EQUITY> 15,710,678
<SALES> 0
<TOTAL-REVENUES> 8,534,265
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,734,064
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 83,707
<INCOME-PRETAX> (383,506)
<INCOME-TAX> (130,392)
<INCOME-CONTINUING> (253,114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,114)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
