SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
Commission File Number: 0-20806
FIRSTMARK CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
Maine 01-0389195
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
P.O. Box 1398
Richmond, Virginia 23218
(Address of Principle Executive Offices)
(804) 648-6000
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 X No
------- -------
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
5,299,876 shares of common stock, par value $0.20 per share,
outstanding as of April 30, 1998
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FIRSTMARK CORP.
TABLE OF CONTENTS
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Page No.
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Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997..............................................3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997........................................5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997........................................6
Notes to Condensed Consolidated Financial Statements.......................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation..........................................................8
Part II. Other Information
Item 1. Legal Proceedings.........................................................................10
Item 2. Changes in Securities and Use of Proceeds.................................................10
Item 3. Defaults Upon Senior Securities...........................................................10
Item 4. Submission of Matters to a Vote of Security Holders.......................................10
Item 5. Other Information.........................................................................10
Item 6. Exhibits and Reports on Form 8-K..........................................................10
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<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FIRSTMARK CORP. AND SUBSIDIARIES
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Condensed Consolidated Balance Sheets
===================================================================================================================
ASSETS
March 31, 1998 December 31, 1997*
-------------- ------------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 2,914,564 $ 2,293,136
Accounts and notes receivables - trade, net 1,052,360 1,287,453
Accounts and notes receivables - related parties 94,671 103,338
Income taxes receivable 248,776 248,776
Marketable securities:
Held for sale 295,617 348,454
Held to maturity 1,402,861 1,800,091
Venture capital investments, net 1,196,345 1,283,645
Real estate and other investments 809,668 809,668
Title plant 3,563,008 3,563,008
Property, plant and equipment, net 803,320 830,533
Excess of cost over fair value 948,206 961,272
Deferred tax asset 920,073 920,073
Other assets 209,872 168,234
-------------- --------------
Total Assets $ 14,459,341 $ 14,617,681
============== ==============
</TABLE>
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<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1998 December 31, 1997*
-------------- ------------------
(Unaudited)
<S> <C> <C>
Liabilities:
Accounts payable and other liabilities $ 474,875 $ 575,463
Borrowed funds 1,047,164 1,060,465
Reserve for title policy claims 968,316 1,027,607
Deferred tax liability 920,073 920,073
--------------- --------------
Total Liabilities 3,410,428 3,583,608
--------------- --------------
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 5,501,430 shares 1,100,286 1,100,286
Additional paid-in capital - preferred 2,162,889 2,162,889
Additional paid-in capital - common 11,498,331 11,498,331
Retained earnings (deficit) (2,720,129) (2,725,070)
Treasury stock, at cost - 201,554 shares (818,773) (818,773)
Net unrealized gain (loss) on marketable
equity securities held for sale, net of taxes (185,091) (194,990)
--------------- --------------
Total Stockholders' Equity 11,048,913 11,034,073
--------------- --------------
Total Liabilities and Stockholders' Equity $ 14,459,341 $ 14,617,681
=============== ==============
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*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
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Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Revenues
Title insurance $ 2,575,714 $ 2,145,729
Investment gains (losses) 22,583 (145,674)
Interest and dividends 95,362 165,207
Other revenues 72,538 44,448
------------ ------------
Total revenues 2,766,197 2,209,710
------------ ------------
Expenses
Employee compensation and benefits 1,204,045 1,091,632
Commissions and fee expense 635,525 745,104
Write-offs of investments - 100,000
General and administrative expenses 775,646 714,367
Minority interest 111,840 57,726
------------ ------------
Total expenses 2,727,056 2,708,829
------------ ------------
Earnings (losses) before income taxes 39,141 (499,119)
Income tax (benefit) expense - (169,648)
------------ ------------
Net earnings (loss) 39,141 (329,471)
Preferred stock dividend 34,200 34,200
------------ ------------
Net earnings (loss) applicable to common shares $ 4,941 $ (363,671)
============ ============
Earnings (loss) per common share - basic and diluted $ .00 $(.16)
============ ============
Weighted - average number of shares outstanding 5,299,876 2,271,144
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
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<CAPTION>
===================================================================================================================
Three Months Ended
March 31,
---------
1998 1997
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Cash flows from Operating Activities
Net earnings (loss) $ 39,141 $ (329,471)
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 55,734 59,370
Write-down of investments - 100,000
Collection of income taxes receivable - 144,773
Marketable securities - trading account - (171,928)
Changes in assets and liabilities 27,704 (79,215)
----------- ------------
Net cash provided (used) by operating activities 122,579 (276,471)
----------- ------------
Cash flows from Investing Activities
Decrease in real estate - 200,955
Decrease in notes receivable 8,983 26,665
Securities held for sale 52,837 99,116
Securities held to maturity 397,230 -
Decrease in venture capital investments 87,300 -
----------- ------------
Net cash provided by investing activities 546,350 326,736
----------- ------------
Cash flows from Financing Activities
Preferred stock dividends (34,200) (34,200)
Repayments of borrowed funds (13,301) (201,237)
----------- ------------
Net cash used by financing activities (47,501) (235,437)
----------- ------------
Net change in cash and cash equivalents 621,428 (185,172)
Cash and cash equivalents, beginning of period 2,293,136 1,832,681
----------- ------------
Cash and cash equivalents, end of period $ 2,914,564 $ 1,647,509
----------- ------------
Cash payments for interest $ 28,077 $ 33,431
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE>
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 year ended December 31, 1997 of Firstmark
Corp. (the "Company"), as amended, as filed with the Securities and
Exchange Commission. The December 31, 1997 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, 1998 are not necessarily indicative of the results to be expected for
the full year.
3. Earnings (Loss) Per Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share,"
for the year ended December 31, 1997. SFAS No. 128 establishes new
standards for computing and presenting earnings per share ("EPS"). The
statement replaces the presentation of primary EPS with basic EPS and the
presentation of fully diluted EPS with diluted EPS. Basic EPS is computed
by dividing net income, less required dividends on redeemable preferred
stock, by the weighted average number of common shares outstanding during
the year. Diluted EPS is computed using the weighted average number of
common shares outstanding during the year, including the dilutive effect
of all potential common shares.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Through a subsidiary, Southern Title Insurance Corporation ("STIC"),
Firstmark Corp. (the "Company") is principally engaged in the business of
issuing title insurance. The Company also makes venture capital and real estate
investments either in the form of pure equity investments or in the form of
loans with an equity participation feature and makes control investments in
situations where the Company's management actually operates the business. Until
January 24, 1997, the Company also actively traded public stocks and bonds and
provided financial consulting services to a select number of individuals and
institutions. A complete discussion of the Company's business is contained in
Item 1, Description of Business, of Amendment No. 1 to the Company's Annual
Report on Form 10-KSB (the "Form 10-KSB"), filed with the Securities and
Exchange Commission on April 20, 1998.
Results of Operations
Three Months ended March 31, 1998
compared to the Three Months ended March 31, 1997
-------------------------------------------------
Total revenues for the three months ended March 31, 1998 increased to
approximately $2,766,000, an increase of approximately $556,000 or 20% compared
to total revenues of approximately $2,210,000 in the comparable quarter of the
prior year. The increase is primarily attributable to increased title insurance
revenues due to the favorable interest rate environment, which has generated a
significant number of refinancings in the residential and commercial markets.
Investment gains amounted to approximately $23,000 for the quarter ended March
31, 1998 compared to a loss of $146,000 in the prior year quarter. Losses in the
prior year quarter were primarily the result of sales of certain investments,
principally small cap stocks, to increase the Company's liquidity. Interest and
dividends revenue decreased approximately $70,000 to $95,000 for the quarter
ended March 31, 1998 as compared to $165,000 for the comparable quarter of the
prior year. The decrease is primarily the result of a one-time dividend of
approximately $94,000 received in the prior year quarter.
Operating expenses and general and administrative expenses increased
approximately $64,000 during the current quarter compared to the comparable
quarter of the prior year. This increase is primarily the result of (i) higher
personnel costs related to increasing volumes and expansion of the title
insurance operations and (ii) an increase in the provision for policy claims
primarily attributable to legal expenses pertaining to the Lake Anna lawsuit
(for further information on this lawsuit, see Item 3, Legal Proceedings, of the
Form 10-KSB). The write-off of investments of $100,000 in the quarter ended
March 31, 1997 (none in the current year quarter) relates to management's
decision to provide an allowance for certain investments, where the ultimate
realization of the Company's investment was in doubt.
-8-
<PAGE>
Liquidity and Capital Resources
The Company's cash and cash equivalents were approximately $2,915,000
at March 31, 1998 as compared to $2,293,000 at December 31, 1997. However, a
significant portion of the cash and cash equivalents (approximately $2,036,000
at March 31, 1998 and $1,707,000 at December 31, 1997) was held by a subsidiary,
STIC, and is subject to certain regulatory requirements as to use.
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. Additionally, the Company has an available line of
credit of $500,000, for which no borrowings are outstanding at March 31, 1998.
Year 2000 and Recent Accounting Pronouncements
Reference is made to the disclosures included under the headings "Year
2000" and "Recent Accounting Pronouncements" in Item 6, Management's Discussion
and Analysis of Financial Condition and Results of Operations, of the Form
10-KSB.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the disclosures in Item 3, Legal Proceedings,
of the Form 10-KSB for a description of the Company's pending legal
proceedings. There have been no additional material developments
with respect to these proceedings.
Item 2. Changes in Securities and Use of Proceeds
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 March 31, 1998.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K - none.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRSTMARK CORP.
Date: May 20, 1998 /s/ Donald V. Cruickshanks
-------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
Date: May 20, 1998 /s/ Ronald C. Britt
-------------------------------------
Ronald C. Britt
Chief Financial Officer
<TABLE> <S> <C>
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<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2914564
<SECURITIES> 1698478
<RECEIVABLES> 1052360
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 2344343
<DEPRECIATION> (1541023)
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<CURRENT-LIABILITIES> 0
<BONDS> 1047164
0
11400
<COMMON> 1100286
<OTHER-SE> 7774338
<TOTAL-LIABILITY-AND-EQUITY> 14459341
<SALES> 0
<TOTAL-REVENUES> 2766197
<CGS> 0
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</TABLE>
