<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-20702
ARGENT CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88-0383765
- ---------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
101 MAIN STREET, THIRD FLOOR, HUNTINGTON BEACH, CALIFORNIA 92648
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(714) 374-1263
- --------------------------------------------------------------------------------
(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 of 1934 during the preceding 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 [ ].
Number of shares of the registrant's classes of common equity as of the
latest practicable date (August 13, 1998): 2,292,819.
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ARGENT CAPITAL CORPORATION
INDEX TO FORM 10QSB
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
PART 1. FINANCIAL INFORMATION
<S> <C> <C>
Item 1 - Financial Statements:
Consolidated Balance Sheets as of June 30, 1998 (unaudited)
and December 31, 1997 3
Consolidated Statements of Income for the Three Months and Six
Months Ended June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 (unaudited) 5
Notes to the Consolidated Financial Statements for the Six Months
Ended June 30, 1998 and 1997 (unaudited) 6
Item 2 - Management's Discussion and Analysis of Financial Condition, Results of
Operations, Liquidity and Capital Resources 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
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PART 1. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS.
ARGENT CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 777,277 $ 407,147
Accounts receivable 17,325 119,247
Mortgage loans, held for sale 6,157,767 14,035,194
Notes receivable 648,316 603,470
Prepaid expenses 105,938 4,869
Prepaid income taxes 185,881 116,455
----------- -----------
Total current assets 7,892,504 15,286,382
Property and Equipment:
Vehicle 65,312 47,624
Furniture, fixtures and equipment 953,908 950,163
----------- -----------
1,019,220 997,787
Less: accumulated depreciation 492,743 438,974
----------- -----------
Total property and equipment, net 526,477 558,813
Other Assets 81,658 22,405
----------- -----------
Total Assets $ 8,500,639 $15,867,600
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable & accrued liabilities $ 335,441 $ 399,925
Warehouse financing facilities 5,402,156 13,060,232
----------- -----------
Total current liabilities 5,737,597 13,460,157
Deferred income tax liability 62,328 62,328
Negative goodwill and other deferred credits 329,187 --
----------- -----------
Total liabilities 6,129,112 13,522,485
Shareholders' Equity:
Common stock, $.001 par value;
authorized 10,000,000 shares,
issued 2,306,512 shares 2,306 271,739
Retained earnings 536,726 1,245,115
Treasury stock, 13,333 shares (63,281) --
Additional paid-in-capital 1,895,776 828,261
----------- -----------
Total shareholders' equity 2,371,527 2,345,115
----------- -----------
Total Liabilities and Shareholders' Equity $ 8,500,639 $15,867,600
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
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ARGENT CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Gain on sale of loans $ 837,335 $ 1,037,031 $ 1,629,362 $ 2,068,774
Interest income 447,415 95,733 924,860 445,185
Other income (expense) (2,985) 30,897 1,146 30,897
----------- ----------- ----------- -----------
Total revenues 1,281,765 1,163,661 2,555,368 2,544,856
EXPENSES:
General & administrative 1,084,611 822,618 2,486,112 2,052,120
Provision for bad debts (60,852) -- 167,148 --
Interest 291,070 32,229 523,063 66,833
----------- ----------- ----------- -----------
Total expenses 1,314,829 854,847 3,176,323 2,118,953
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (33,064) 308,814 (620,955) 425,903
Provision for income taxes -- 11,871 -- 70,332
----------- ----------- ----------- -----------
Net income (loss) $ (33,064) $ 296,943 $ (620,955) $ 355,571
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE (NOTE 6):
Basic $ (0.01) $ 1.09 $ (.27) $ 1.31
=========== =========== =========== ===========
Diluted $ (0.01) $ 1.09 $ (.27) $ 1.31
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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ARGENT CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (620,955) $ 355,571
Adjustments:
Depreciation and amortization 98,159 108,651
(Increase)/decrease in assets:
Mortgage loans purchased for sale (29,586,486) (26,578,163)
Proceeds from sale of mortgage loans 36,974,913 24,243,412
Accounts receivable 117,441 1,302,352
Prepaid income taxes (22,844) (261,270)
Prepaid expenses (101,069) (21,854)
Other assets 8,852 (137,687)
Increase/ (decrease) in liabilities:
Accounts payable & accrued liabilities (169,980) (268,976)
Valuation allowance on mortgage loans 380,000 --
Other deferred assets (892) --
------------ ------------
Net cash generated (used in) operating activities 7,077,139 (1,257,964)
------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment (76,635) (13,613)
Sale of property and equipment -- 86,862
Collection of notes receivable 99,176 43,914
------------ ------------
Net cash generated (used in) investing activities 22,541 117,163
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in warehouse financing facility (7,658,076) 260,625
Cash from February 1998 merger 928,526 --
------------ ------------
Net cash generated (used in) financing activities (6,729,550) 260,625
------------ ------------
Net increase (decrease) in cash 370,130 (880,176)
Cash and cash equivalents at beginning of period 407,147 841,697
------------ ------------
Cash and cash equivalents at end of period $ 777,277 $ (38,479)
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
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NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements at June 30, 1998
include the accounts of Argent Capital Corporation, a corporation organized in
the State of Nevada, and its majority-owned subsidiaries (collectively, the
"Company"). The subsidiaries include Argent Mortgage Corporation (previously
known as Clearview Mortgage Corporation), and Sunport Medical Corporation (USA).
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Prior to February 27, 1998, the Company operated as Sunport Medical Corporation,
a company organized in British Columbia. On February 27, 1998, Argent Capital
Corporation merged with Sunport Medical Corporation. On that same date,
immediately following the merger, the Company acquired all of the outstanding
common shares of Argent Mortgage Corporation from Clearview Holding Corporation
by issuance of a sufficient number of shares of the Company's common stock to
give Clearview Holding Corporation a 71% interest in the common stock of the
Company immediately following the acquisition. This transaction (the "Merger")
is described in detail in the Company's Form 8-K filed in March 1998.
Following the Merger, Argent Capital Corporation is the surviving legal entity.
However, in the accompanying financial statements, all historical information
prior to the Merger represents only the Argent Mortgage Corporation accounts, as
that is the surviving company for accounting purposes.
CHANGE IN ACCOUNTING YEAR
Effective December 31, 1997, the Company elected to change its year-end from
September 30 to December 31 to coincide with the year-end of Clearview Mortgage
Corporation.
USE OF ESTIMATES
The Company prepares financial statements in conformity with generally accepted
accounting principles that require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the accounting period.
Actual results could differ from those estimates.
FAIR VALUE DISCLOSURES
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. These
estimates are subjective in nature and involve uncertainties and matters of
considerable judgment. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different
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assumptions, judgments and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
SALE OF MORTGAGE LOANS
Gains and losses resulting from sales of mortgage loans are recognized at
settlement date, and are based on the difference between the selling price and
the carrying value of the related loans sold. Nonrefundable fees and direct
costs associated with the purchase of mortgage loans are deferred and recognized
when the loans are sold. The Company sells all loans on a servicing released
basis.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES
The Financial Accounting Standards Board issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,"
to provide accounting and reporting guidance for transfers and servicing of
financial assets and extinguishment of liabilities. The statement uses the
"financial-components approach" in which, after a transfer of financial assets,
an entity would recognize all financial assets and services it controls and all
liabilities it has incurred and remove financial assets and liabilities from the
balance sheet when controls are surrendered or when they are extinguished,
respectively. This statement, with certain provisions deferred, has no
significant impact on results of operations or financial position of the
Company.
STOCK-BASED COMPENSATION
During the year ended September 30, 1997, the Company adopted Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation" ("SFAS 123"). The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period. Pursuant to the new standard, companies are encouraged, but
not required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees ("APB 25"), but would be required to
disclose pro forma net income and, if presented, earnings per share as if the
company had applied the new method of accounting. The accounting requirements of
the new method are effective for all employee awards granted after the beginning
of the fiscal year of adoption, whereas the disclosure requirements apply to all
awards granted subsequent to October 1, 1994. The Company will continue to
recognize and measure compensation for its stock option plan in accordance with
the existing provisions of APB 25.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income". The Company reports no difference
between comprehensive income and net income.
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RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to 1998
presentation. These changes had no impact on previously reported results of
operations or shareholders' equity.
NOTE 2. NOTES RECEIVABLE
The Company had Notes Receivable totaling $648,316 at June 30, 1998. This amount
consists of the following:
<TABLE>
<S> <C>
Note secured by real estate $499,207
Note due from retail mortgage company 100,000
Other 49,109
--------
$648,316
========
</TABLE>
The note secured by real estate is due upon the sale of the underlying
collateral property. The balance of notes receivable are due within one year.
The notes receivable generally bear interest at rates ranging from 7% to 9%.
The shareholders of the note due from retail mortgage company have granted the
Company a one year option to purchase 100% of the common stock of the debtor for
a sum based on five times the 1998 after tax earnings of the debtor.
NOTE 3. WAREHOUSE FINANCING FACILITIES
In October 1997, the Company obtained a $15,000,000 revolving warehouse
financing facility under which the Company may borrow, repay, and reborrow
funds. Interest under the facility is charged at a floating rate of LIBOR plus
2%. The agreement requires payment of a warehousing fee in advance, as well as
require Argent Mortgage Corporation to maintain a certain minimum level of
tangible net worth. Borrowings under the facility are covered by a security
interest in certain mortgage loans towards which the advances were made. This
warehouse financing facility is due on July 31, 1998, but is subject to
continuing renewals under an indefinite series of available 3-month extensions.
The facility currently requires that payment is due from the receipt of 100% of
the funds from the sale of the underlying collateral mortgage loans. As of June
30, 1998, the outstanding balance on this line was $5,343,605.
In addition, in May 1998, the Company obtained a second $549,100 warehouse
facility. This line bears interest at 14.5% and is due on demand or, if no
demand is made, on August 15, 1998. As of June 30, 1998, the outstanding balance
on this line was $58,551.
Finally, in June 1998, the Company obtained a third facility in the amount of
$10 million. This facility bears interest at rates ranging from 2-4% over prime,
depending upon the security position of the collateral mortgages being
warehoused. There was no outstanding balance on this facility as of June 30,
1998.
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NOTE 4. COMMON STOCK
The Company has issued stock options at fair value to certain directors and
employees which vest upon issuance and expire five years from issuance. The
transactions for the period ended June 30, 1998 are summarized as follows and
have been adjusted for the Company's 30 to 1 reverse split that was effective
February 27, 1998:
<TABLE>
Weighted
Shares Avg
Subject Exercise
Outstanding At to Option Option Price Price
---------------------- ------------- -------------------- ------------
<S> <C> <C> <C>
09/30/97 & 12/31/97 55,000 $4.50 and $4.80 $4.50
=============
</TABLE>
At June 30, 1998, 55,000 options were exercisable and the weighted average
remaining contractual life was 37 months.
In the year ended September 30, 1997, the Company adopted SFAS No. 123, however,
as permitted by the standard, the Company has elected to continue following the
guidance of APB 25 for measurement and recognition of stock-based transactions
with employees. Accordingly, no compensation cost has been recognized for the
Company's option plans. The effects of determining compensation cost based on
the fair value of the grant date for these options, consistent with the method
of SFAS No. 123, would yield an immaterial difference.
NOTE 5. INCOME TAX
Deferred tax assets and liabilities are determined based on the difference
between financial and tax reporting bases of assets and liabilities. These
differences result in taxable or deductible amounts in future years. Argent
Mortgage has filed a revised income tax return for the year ended December 31,
1996 which will result in a refund to the Company of approximately $101,000. The
Company has extended the filing of Argent Mortgage Corporation's 1997 federal
income tax return. It is currently expected that no tax will be due upon the
filing of that return.
In addition, Argent Mortgage Corporation made payments in 1997 to certain
foreign entities and/or individuals and withheld no federal income taxes. The
Company is reviewing the tax treaties of the countries of incorporation and/or
residence of these foreign payees to determine if any tax liability exists
NOTE 6. EARNINGS (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share", which is effective
for
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financial statements for periods ending after December 15, 1997 and requires
restatement of all prior-period EPS data presented. This Statement replaces the
presentation of primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the income statement and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation:
<TABLE>
<CAPTION>
For the six month period ended 06/30/98
---------------------------------------------
(Loss) Shares Loss Per Share
---------------------------------------------
<S> <C> <C> <C>
Net Loss $ (620,955)
==========
Basic EPS Loss available to shareholders $ (620,955) 2,292,819 $ (.27)
Effect of Dilutive Securities N/A
Options N/A
---------------------------------------------
Diluted EPS
Loss available to common share-
holders plus assumed conversions $ (620,955) 2,292,819 $ (.27)
=============================================
</TABLE>
Options to purchase 46,667 shares of common stock at $4.50 and 8,333 shares of
common stock at $4.80 were outstanding during the period presented but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares.
<TABLE>
<CAPTION>
For the six months ended 06/30/97:
----------------------------------------------
Earnings Per
Income Shares Share
----------------------------------------------
<S> <C> <C> <C>
Net Income $ 355,571
===========
Basic EPS
Earnings available to shareholders $ 355,571 271,739 $ 1.31
Effect of Dilutive Securities
----------------------------------------------
Diluted EPS
Earnings available to common
shareholders plus assumed
conversions $ 355,571 271,739 $ 1.31
==============================================
</TABLE>
The period presented for the six months ended June 30, 1997 pertains only to
Argent Mortgage Corporation. There were no dilutive securities outstanding for
this period for Argent Mortgage Corporation.
NOTE 7. CONTINGENCIES.
A malpractice suit filed against two of the Company's former subsidiaries on
March 8, 1996 was mediated on July 16, 1997 with no resolution of the claim.
This lawsuit claims damages in excess of the minimum jurisdictional limits and
is being handled by the Company's malpractice carrier. A court date has been
scheduled for no later than mid-October 1998. The plaintiffs have designated
their expert for this case and depositions of
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this witness are in the process of being scheduled. Based on preliminary
discussions, the Company believes that this expert has testimony that will be
favorable to the defense; however, the likelihood of an unfavorable outcome for
this claim is not readily determinable. As a result, no provision for loss
related to this claim has been made in the accompanying financial statements.
On March 25, 1997, Clearview Capital Corporation filed a complaint in Orange
County Superior Court against former senior management employees for breach of
contract and injunctive relief. This action was subsequently removed to
arbitration where the defendants filed a counterclaim against Clearview for a de
facto/constructive termination of their employment contracts and for
indemnification for their defense. Without the Company paying any settlement,
this complaint was dismissed with prejudice in May 1998 by mutual agreement of
the parties.
Management of the Company believes that the ultimate outcome of these matters
will not have a material adverse effect on the financial position, results of
operations or the liquidity of the Company.
NOTE 8. NASDAQ LISTING
As indicated in the Company's December 31, 1997 10-KSB, the Company was informed
by The NASDAQ Stock Market that the Company is not in compliance with the new
standards required for maintaining continued listing or an initial listing on
The NASDAQ SmallCap Market. On March 26, 1998 the Company filed a request for an
exception to the listing requirements. By letter dated July 20, 1998, NASDAQ's
Listings Qualification Panel (the "Panel") notified the Company that, subject to
the Company's right to appeal, the Panel had determined to delist the Company's
securities from the SmallCap Market. The Company timely filed such an appeal and
requested an oral hearing at which it will be given the opportunity to present
written and oral evidence supporting its ability to regain and maintain
compliance with all applicable listing requirements. The oral hearing has been
scheduled for September 2, 1998 in Washington, D.C. and management is preparing
a comprehensive presentation, including a new business plan and a specific
timetable for regaining compliance with NASDAQ listing requirements. The Company
is unaware of the Panel's timetable for rendering any decision on the appeal. In
the event the Panel determines to delist the Company, the Company has additional
appeal rights which may, if pursued, defer any such action.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW.
The accompanying financial statements include the accounts of Argent Capital
Corporation, a corporation organized in the state of Nevada, and its
majority-owned subsidiaries (collectively, the "Company"). The subsidiaries
include Argent Mortgage Corporation (previously known as Clearview Capital
Corporation) and Sunport Medical Corporation (USA). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Prior to February 27, 1998, the Company operated as Sunport Medical Corporation,
a company organized in British Columbia. On February 27, 1998, Argent Capital
Corporation merged with Sunport Medical Corporation. On that same date,
immediately following the merger, the Company acquired all of the outstanding
common shares of Argent Mortgage Corporation from Clearview Holding Corporation
by issuance of a sufficient number of shares of the Company's stock to give
Clearview Holding Corporation a 71% interest in the common stock of the Company
immediately following the acquisition. This transaction (the "Merger") is
described in detail in the Company's Form 8-K filed March 1998.
Following the Merger, Argent Capital Corporation is the surviving legal entity.
However, in the accompanying financial statements, all historical information
prior to the Merger represents only the Argent Mortgage Corporation accounts as
that is the surviving company for accounting purposes.
LIQUIDITY AND FINANCIAL RESOURCES
The Company's cash and equity positions were both improved by the Merger. The
effects of the Merger are described in more detail under Financial Position,
below. The Company believes that sufficient cash from operations and borrowings
will be generated to fund the current level of operations.
During August 1998 the Company has completed a comprehensive strategic and
business plan for the year. Critical to the execution of such plan is the
continuing upgrading of the managerial team. The Company has either employed or
reached employment terms with three key managers: an Executive Vice President of
Marketing, a Chief Financial Officer and a Chief Operations Officer. All of
these managers possess a considerable depth of knowledge and experience in their
areas of responsibility and will be key in the execution of the Company's plan.
FINANCIAL POSITION
JUNE 30, 1998 COMPARED TO MARCH 31, 1998
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The Company's cash was reduced by $583,000 from March 31, 1998 to June 30, 1998
due primarily to the paydown of Accounts Payable balances by $291,000. The
balance of the reduction was the result of the Company being committed to apply
100% of the proceeds from the sale of its mortgage loans to paydown the
warehousing facility. This requirement was due to the fact that many of the
loans sold during the second quarter of 1998 had already been on the warehousing
facility for an unacceptably long period of time. The Company's reevaluation and
upgrading of its loan underwriting standards will greatly mitigate the
possibility that loans will need to remain on the lines for such long periods of
time in the future.
During the process of reevaluating and upgrading the loan underwriting
standards, the Company essentially stopped purchasing new loans. Due to this,
during the second quarter 1998, Mortgage Loans Held for Sale were decreased by
$7.7 million, while the Warehouse Financing Facilities were paid down by $8.1
million.
JUNE 30, 1998 COMPARED TO JUNE 30, 1997
The Company's cash balance increased by $816,000 from June 30, 1997 to June 30,
1998 as a direct result of the Merger during the first quarter of 1998 which
contributed $928,000 to the Company's cash balances.
Other significant increases as of June 30, 1998 due to the consolidation of
Argent/ Sunport accounts include an increase of $79,000 in Prepaid Assets, a
$69,000 increase in Accounts Payables and Other Accrued Liabilities and $312,000
of negative goodwill (deferred credit). Overall, the inclusion of the Argent/
Sunport accounts in the June 30, 1998 statements resulted in an increase of
$434,000 to the net worth of the Company.
The Company's Mortgage Loans Held for Sale and the outstanding balance on the
Warehouse Financing Facility have increased by $3.8 million (62%) and $3.9
million (72%), respectively, from June 30, 1997 to June 30, 1998. This increase
is the direct result of the change in the Company's primary method of loan
resale during the latter part of 1997. Prior to that time, the majority of the
Company's loans were purchased in the secondary market by a single investor, who
accepted the majority of the Company's loans almost immediately upon funding. In
late 1997, the Company discontinued doing business with this single investor and
began to develop its secondary marketing efforts with a wider range of
investors. As a result, the secondary marketing effort is taking a longer period
of time, resulting in both the loans and the warehousing facility remaining
outstanding for a longer period of time. The Company's immediate focus is to
finalize the sale of the existing loans so as to free up its financial
resources.
As loans are purchased and/or funded in the future, the Company is significantly
strengthening its underwriting criteria in order to meet the resale requirements
of the greatest number of potential investors. This will mitigate the future
risk that the Company would need to keep the mortgage loans on the warehousing
facility for more than a 45-60 day period.
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RESULTS OF OPERATIONS
SECOND QUARTER OF 1998 COMPARED TO THE FIRST QUARTER OF 1998
General and Administrative expenses were reduced by $317,000 from the first
quarter of 1998 to the second quarter of 1998. These reductions were due
primarily to the cancellation of an advertising campaign which existed in the
first quarter, accompanied by a reduction in the use of consultants and in the
hiring of non-essential staff until the Company completed the reevaluation of
its loan underwriting policies and recommenced its purchase of new mortgage
loans.
The Provision for Bad Debts improved by $289,000 during the second quarter of
1998 compared to the first quarter of 1998 as the company essentially
discontinued the purchase of new mortgage loans.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
Gain on sale of mortgage loans decreased by $439,000 for the six months ended
June 30, 1998 when compared to the comparable period of 1997. This is the direct
result of the reduction in the purchase of new mortgage loans for resale.
Interest income and interest expense increased $480,000 and $456,000,
respectively, for the six month ended June 30, 1998 when compared to the
comparable period of 1997. The reason for both of these increases is the longer
period of time which loans were held for sale during 1998.
General and Administrative expenses increased $434,000 for the six months ended
June 30, 1998 when compared to the comparable period of 1997. The primary reason
for this increase is the inclusion in 1998 of $315,000 of Sunport costs.
SECOND QUARTER OF 1998 COMPARED TO THE SECOND QUARTER OF 1997
Interest income and interest expense increased $362,000 and $259,000,
respectively, for the quarter ended June 30, 1998 when compared to the
comparable period of 1997. The reason for both of these increases is the longer
period of time which loans were held for sale during 1998.
General and Administrative expenses increased $262,000 for the quarter ended
June 30, 1998 when compared to the comparable period of 1997. The primary
reasons for this increase is the inclusion in 1998 of $75,000 of Sunport costs
and of $64,000 of increased consultant costs during the period of transition
from previous to new management.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
On August 13, 1998, the Registrant amended its quarterly report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
on Form 10-QSB for the period ended March 31, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule is attached.
(b) On August 13, 1998, the Registrant amended its Current Report on
Form 8-K filed March 15, 1998.
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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.
August 17, 1998 ARGENT CAPITAL CORPORATION
(Registrant)
By: /s/ Christopher A. Millar
-----------------------------------
Christopher A. Millar, President
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ARGENT
CAPITAL CORPORATION FORM 10-QSB JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 777,277
<SECURITIES> 0
<RECEIVABLES> 7,246,699
<ALLOWANCES> 423,291
<INVENTORY> 0
<CURRENT-ASSETS> 7,892,504
<PP&E> 1,019,220
<DEPRECIATION> 492,743
<TOTAL-ASSETS> 8,500,639
<CURRENT-LIABILITIES> 5,737,597
<BONDS> 0
0
0
<COMMON> 2,474
<OTHER-SE> 2,369,053
<TOTAL-LIABILITY-AND-EQUITY> 8,500,639
<SALES> 0
<TOTAL-REVENUES> 2,555,368
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,176,323
<LOSS-PROVISION> 167,148
<INTEREST-EXPENSE> 523,063
<INCOME-PRETAX> (620,955)
<INCOME-TAX> 0
<INCOME-CONTINUING> (620,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (620,955)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
