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, 2000
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) 648-9048
(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:
5,322,043 shares of common stock, par value $0.20 per share,
outstanding as of March 31, 2000
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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, 2000 and December 31, 1999..............................................3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999........................................5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999........................................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
</TABLE>
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<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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ASSETS
March 31, 2000 December 31, 1999*
-------------- ------------------
(Unaudited)
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Cash and cash equivalents $ 4,577,172 $ 4,541,344
Receivables - related parties 174,779 186,398
Investments:
Marketable securities 147,302 72,828
Venture capital investments - net 15,000 65,000
Real estate and other investments 382,440 418,433
------------ ------------
Total investments 544,742 556,261
------------ ------------
Other assets:
Property, plant and equipment - net 8,664 9,183
Deferred tax asset - net of valuation allowance -- 19,428
Other assets 11,251 20,739
------------ ------------
Total other assets 19,915 49,350
------------ ------------
TOTAL ASSETS $ 5,316,608 $ 5,333,353
============ ============
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<PAGE>
FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 2000 December 31, 1999*
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(Unaudited)
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LIABILITIES:
Accounts payable and other liabilities $ 44,021 $ 88,252
Deferred tax liability 21,437 19,428
------------ ------------
Total liabilities 65,458 107,680
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $0.20 par value -
authorized 250,000 shares; issued 53,500 shares
(liquidation preference $2,140,000) 10,700 10,700
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 2,023,589 2,023,589
Additional paid-in capital - common 11,358,400 11,358,400
Retained earnings (deficit) (8,586,099) (8,569,964)
Treasury stock, at cost - 179,387 shares (663,486) (663,486)
Net accumulated comprehensive income -
net of taxes 7,760 (33,852)
------------ ------------
Total stockholders' equity 5,251,150 5,225,673
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,316,608 $ 5,333,353
============ ============
</TABLE>
*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,
2000 1999
---- ----
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REVENUES:
Interest and dividends $ 81,939 $ 17,567
Investment gains, net 23,951 --
------------ ------------
Total revenues 105,890 17,567
------------ ------------
EXPENSES:
Employee compensation and benefits -- 18,600
General and administrative expenses 89,925 115,993
Interest expense -- 8,995
------------ ------------
Total expenses 89,925 143,588
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Income (loss) from continuing operations before income
taxes 15,965 (126,021)
INCOME TAX (BENEFIT) EXPENSE
-- --
Net income (loss) from continuing operations 15,965 (126,021)
DISCONTINUED OPERATIONS:
Income from discontinued operations - net of tax -- 80,596
Loss from disposal of discontinued operations - net of tax -- (5,118)
------------ ------------
NET INCOME (LOSS) 15,965 (50,543)
------------ ------------
PREFERRED STOCK DIVIDEND 32,100 34,200
------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES (16,135) (84,743)
============ ============
Other comprehensive income - net of tax
Unrealized holding gains (losses) arising during period 41,612 (48,014)
Less: Reclassification adjustment for gains included in net income -- --
------------ ------------
Other comprehensive income (loss) 41,612 (48,014)
------------ ------------
COMPREHENSIVE INCOME (LOSS) APPLICABLE TO COMMON SHARES 25,477 (98,557)
------------ ------------
Basic and diluted earnings (loss) per common share:
Income (loss) from continuing operations $ 0.00 $ (0.03)
Discontinued Operations 0.00 0.01
------------ ------------
Comprehensive income (loss) applicable to common shares $ 0.00 $ (0.02)
============ ============
$ 0.00 $ (0.02)
============ ============
Weighted - average number of shares outstanding 5,322,043 5,319,876
============ ============
</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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Three Months Ended
March 31,
---------
2000 1999
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OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income (loss) from continuing operations $ 15,965 $ (126,021)
Adjustments to reconcile net income (loss) net cash
used by operating activities
Depreciation and amortization 519 519
Gain on sale of venture capital investments (25,000) --
Net loss on sale of real estate investments 2,072 --
Other non-cash changes (11,424) --
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 11,619 (17,130)
Prepaid expenses and other current assets 9,489 6,246
Increase (decrease) in:
Accounts payable and other liabilities (44,232) (66,373)
Accounts payable to related party -- (88,839)
------------ ------------
Net cash used by operating activities (40,992) (291,598)
------------ ------------
Cash flows from Investing Activities
Increase in real estate investments (4,308) (2,038)
Proceeds from sale of venture capital investments 75,000 --
Proceeds from sale of real estate investments 38,228 --
------------ ------------
Net cash provided (used) by investing activities 108,920 (2,038)
------------ ------------
Cash flows from Financing Activities
Preferred stock dividends (32,100) (34,200)
Proceeds from borrowings -- 115,000
Repayments of borrowed funds -- (680,000)
------------ ------------
Net cash used by financing activities (32,100) (599,200)
------------ ------------
Cash Provided (Used) by Continuing Operations 35,828 (892,836)
------------ ------------
Discontinued Operations:
Proceeds from sale of discontinued operations,
net of transaction costs paid -- 6,242,738
Other -- (269,868)
------------ ------------
Cash Provided (Used) by Discontinued Operations -- 5,972,870
------------ ------------
Net change in cash and cash equivalents 35,828 5,373,670
Cash and cash equivalents, beginning of period 4,541,344 53,575
------------ ------------
Cash and cash equivalents, end of period $ 4,577,172 $ 5,427,245
------------ ------------
Cash payments for interest $ -- $ 8,995
============ ============
</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)
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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,
1999 of Firstmark Corp. (the "Company"), as amended, as filed with the
Securities and Exchange Commission. The December 31, 1999 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, 2000 are not necessarily indicative of the results to be expected
for the full year.
3. Earnings (Loss) Per Common Share
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.
4. Reclassifications
Certain reclassifications have been made in the accompanying statements
to permit comparison.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion provides information about the major
components of the results of operations and financial condition, liquidity and
capital resources of the Company. This discussion and analysis should be read in
conjunction with the Consolidated Financial Statements and Notes to Consolidated
Financial Statements.
Until March 5, 1999, the Company was principally engaged in the
business of issuing title insurance through a subsidiary, Southern Title
Insurance Corporation ("STIC"). 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.
On March 5, 1999, the Company sold Investors Southern Corporation
("ISC") and its subsidiaries, including STIC, to Old Guard Group, Inc. ("Old
Guard") for $6.75 million in cash and a three year earn-out in cash based on the
pre-tax net income of ISC and its subsidiaries, including STIC, for each of the
fiscal years ending December 31, 1999, 2000 and 2001. Generally accepted
accounting principles ("GAAP") required that the Company reflect the effects of
the transaction as of December 31, 1998, including the loss on disposal, and
segregate continuing operations from discontinued operations. 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 6,
2000.
Results of Operations
Three Months ended March 31, 2000
compared to the Three Months ended March 31, 1999
-------------------------------------------------
Continuing Operations
- ---------------------
Interest and dividends revenue amounted to approximately $82,000 in the
current quarter compared to $18,000 in the comparable quarter of the prior year.
This increase results from investment of the net proceeds from the sale of the
title insurance operations for the entire current year quarter as compared to
less than a month in the prior year quarter. Net investment gains relating to
sales of venture capital and real estate investments amounted to approximately
$24,000 for the quarter ended March 31, 2000 (none for the prior year quarter).
Operating expenses and general and administrative expenses decreased by
approximately $54,000 during the current quarter compared to the prior year
quarter. This decrease is primarily the result of the satisfaction of the
Company's remaining obligation under a severance agreement with a former
director of the Company and a reduction in interest expense due to the payoff of
the Company's 9% convertible notes payable in March of the last year.
Discontinued Operations
- -----------------------
As previously disclosed, the title insurance operations were sold as of
March 5, 1999. Accordingly, the condensed consolidated statement of operations
included in this report includes
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<PAGE>
operating results for the title insurance operations through that date in the
prior year quarter while no title insurance operations are included in the
current year quarter.
Liquidity and Capital Resources
At March 31, 2000, the Company's cash and cash equivalents amounted to
approximately $4.6 million, which is expected to exceed its obligations as they
become due.
Year 2000 Issues
Year 2000 issues relate primarily to the inability of certain
computerized devices (hardware, software and equipment) to process year-dates
properly after 1999. Many existing computer programs have been written using
only two digits to define an applicable year rather than four digits.
Accordingly, on January 1, 2000, many date-sensitive programs and devices may
have recognized a date using the two digits "00" as the year 1900 rather than
the year 2000. This situation could have resulted in inaccurate processing of
data, erroneous results or other system failures.
As a result of the identification and assessment of the Company's Year
2000 issues and the subsequent implementation of procedures to address any
potential problem areas, the Company is not aware of any problems it has
experienced in processing transactions to date in the year 2000.
Recent Accounting Pronouncements
Reference is made to the disclosures included under the heading "Recent
Accounting Pronouncements" in Item 6, Management's Discussion and Analysis of
Financial Condition and Results of Operations, of the Form 10-KSB.
Forward-Looking Statements
Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Although the Company believes that its expectations with respect to
certain forward-looking statements are based upon reasonable assumptions within
the bounds of its business and operations, there can be no assurance that actual
results, performance or achievements of the Company will not differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
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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
Not applicable.
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 15, 2000 /s/ Donald V. Cruickshanks
-------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
Date: May 15, 2000 /s/ Ronald C. Britt
-------------------------------------
Ronald C. Britt
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB FOR FIRSTMARK CORP. FOR THE PERIOD ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL
INFORMATION CONTAINED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,577,172
<SECURITIES> 147,302
<RECEIVABLES> 174,778
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,126
<DEPRECIATION> 10,462
<TOTAL-ASSETS> 5,316,606
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
10,700
<COMMON> 1,100,286
<OTHER-SE> 4,140,162
<TOTAL-LIABILITY-AND-EQUITY> 5,316,606
<SALES> 0
<TOTAL-REVENUES> 105,890
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 89,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,965
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,965
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
