<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(AMENDMENT NO. 1)
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: September 30, 1998
-------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For transition period from__________ to ___________
Commission File No.: 0-22936
Crown NorthCorp, Inc.
---------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-3172740
- ------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1251 Dublin Road, Columbus, Ohio 43215
--------------------------------------------------
(Address of principal executive offices)
(614) 488-1169
------------------------------
(Issuer's telephone number)
N/A
----------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
As of October 31, 1998, the issuer had 11,064,710 shares of its common
stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one). Yes No X
--- ---
<PAGE> 2
<TABLE>
<CAPTION>
CROWN NORTHCORP, INC.
FORM 10-QSB/A
(AMENDMENT NO. 1)
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
INDEX
PART I. PAGES
Item 1. Financial Statements (Unaudited)
<S> <C>
Condensed Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 ...................................................... 1
Condensed Consolidated Statements of Operations for the
third quarter and the nine months ended September 30, 1998 (as restated)
and 1997.................................................................... 2
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997............................... 3
Notes to Condensed Consolidated Financial Statements-
September 30, 1998 (as restated) and 1997................................... 4
Item 2. Management's Discussion and Analysis........................................ 9
PART II.
Item 1. Legal Proceedings........................................................... 18
Item 2. Changes in Securities...................................................... 18
Item 3. Defaults Upon Senior Securities............................................. 19
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
Item 5. Other Information........................................................... 19
Item 6. Exhibits and Reports on Form 8-K............................................ 19
(a) Exhibits ............................................................ 19
(b) Reports on Form 8-K.................................................. 19
Signatures............................................................................. 20
Exhibit Index.......................................................................... 21
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,433,823 $ 735,940
Receivables-net 2,106,023 1,672,306
Prepaid expenses and other 301,370 275,283
------------- ------------
Total current assets 4,841,216 2,683,529
------------- ------------
PROPERTY AND EQUIPMENT-net 1,748,842 1,838,325
RESTRICTED CASH 5,227,268 4,550,766
OTHER ASSETS 5,313,014 2,347,993
------------- ------------
TOTAL $ 17,130,340 $ 11,420,613
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES $ 2,897,603 $ 2,143,011
LONG-TERM OBLIGATIONS:
Notes and bonds payable- less current portion 3,218,325 2,563,550
Allowance for loan losses and other 744,207 1,385,721
------------ -----------
Total long-term obligations 3,962,532 3,949,271
REDEEMABLE PREFERRED STOCK 2,000,000 2,000,000
SHAREHOLDERS' EQUITY:
Common stock 110,543 108,310
Convertible preferred stock:
Series AA 1
Series BB 1
Additional paid-in capital 9,974,972 4,209,752
Retained earnings (accumulated deficit) (1,815,043) (976,367)
Treasury stock, at cost (269) (13,364)
------------- ------------
Total shareholders' equity 8,270,205 3,328,331
------------- ------------
TOTAL $ 17,130,340 $ 11,420,613
============= ============
</TABLE>
See notes to condensed consolidated financial statements
1
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<TABLE>
<CAPTION>
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------
THIRD QUARTER YEAR TO DATE
------------- ------------
1998 1997 1998 1997
---- ---- ---- ----
(AS RESTATED--
SEE NOTE 10)
REVENUES:
<S> <C> <C> <C> <C>
Management fees $ 974,632 $ 835,382 $2,180,508 $ 2,810,345
Incentive and disposition fees 194,540 1,296,517 1,386,263 3,067,942
Income from partnerships and joint ventures 413,403 157,656 460,802 292,914
Origination fees, interest and other income 592,836 563,469 1,585,186 1,226,539
----------- ----------- ----------- ------------
Total revenues 2,175,411 2,853,024 5,612,759 7,397,740
----------- ----------- ----------- ------------
OPERATING AND ADMINISTRATIVE EXPENSES:
Personnel 1,551,605 1,832,134 4,356,434 5,568,098
Occupancy, insurance and other 548,552 591,783 1,443,935 2,037,590
Provision for loan losses (674,000)
Amortization and depreciation 96,081 89,625 277,386 266,458
----------- ----------- ----------- ------------
Total operating and administrative expenses 2,196,238 2,513,542 5,403,755 7,872,146
----------- ----------- ----------- ------------
INCOME (LOSS) FROM OPERATIONS (20,827) 339,482 209,004 (474,406)
OTHER EXPENSES:
Delayed offering costs - 851,452
Restructuring charge 570,000
Employment contract settlement and other 206,563
Interest 63,188 84,811 196,228 282,801
----------- ----------- ----------- ------------
Total other expenses 63,188 84,811 1,047,680 1,059,364
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (84,015) 254,671 (838,676) (1,533,770)
INCOME TAX EXPENSE (BENEFIT) - - - (192,183)
----------- ----------- ----------- ------------
NET INCOME (LOSS) $ (84,015) $ 254,671 $ (838,676) $(1,341,587)
SERIES A PREFERRED STOCK DIVIDENDS 14,841
SERIES AA and BB CONVERTIBLE PREFERRED
STOCK DIVIDENDS AT ISSUANCE - - 2,497,268 -
----------- ----------- ----------- ------------
NET LOSS APPLICABLE TO COMMON STOCK $ (84,015) $ 254,671 $(3,335,944) $(1,356,428)
=========== =========== =========== ============
INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.01) $ 0.02 $ (0.31) $ (0.13)
=========== =========== =========== ============
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 5
<TABLE>
<CAPTION>
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (838,676) $(1,341,577)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 420,826 372,333
Decrease in reserve for loan losses (674,000)
Loss on delayed offering 851,453
Income from investments in joint ventures (460,802)
Other - net (100,541)
Change in operating assets and liabilities - net of effects from purchases
and divestitures of subsidiaries:
Accounts receivable 147,044 1,901,160
Prepaid expenses and other assets (26,087) (43,315)
Accounts payable and accrued expenses (174,823) 891,887
----------- -----------
Net cash provided (used) in operating activities (755,065) 1,679,947
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for corporate acquisitions and mergers (1,606,855)
Distributions from partnerships and joint ventures 230,894
Investment in partnerships (2,358,785) (162,500)
Increase in shareholder receivables (392,692)
Purchase of property and equipment (75,882) (172,433)
Increase in restricted cash (676,502)
Other -net (482,180) (146,729)
------------ ------------
Net cash provided (used) in investing activities (3,986,041) (1,857,623)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 3,161,392 4,793,286
Principal payments on notes payable (2,489,858) (5,044,323)
Proceeds from issuance of common stock 162,876 1,049,762
Proceeds from issuance of preferred stock 5,604,579
Other changes - (178,047)
-- ------------
Net cash provided by financing activities 6,438,989 620,678
------------ -----------
NET INCREASE IN CASH DURING THE PERIOD 1,697,883 443,002
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 735,940 587,080
-------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $2,433,823 $ 1,030,082
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 6
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
1. General and Basis of Presentation
---------------------------------
The accompanying unaudited condensed consolidated financial statements
of Crown NorthCorp, Inc., and subsidiaries reflect all material
adjustments consisting of only normal recurring adjustments which, in
the opinion of management, are necessary for a fair presentation of
results for the interim periods. Certain information and footnote
disclosures required under generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission, although the company believes
that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction
with the year-end financial statements and notes thereto included in
the Crown's Form 10-KSB for the year ended December 31, 1997. Certain
reclassifications have been made to the 1997 amounts to conform to the
1998 presentation.
2. Earnings (Loss) Per Common Share
--------------------------------
The loss per share for the quarter and nine month ended September 30,
1998 and the nine months ended September 30, 1997 is computed based on
the loss applicable to common stock divided by the weighted average
number of common shares outstanding during the period (10,979,227
shares, 11,051,681 shares and 9,879,237 shares respectively).
Since there was a loss applicable to common stock for the quarter and
nine months ended September 30, 1998 and the nine months ended
September 30, 1997 there are no potential common shares to be included
in a computation of diluted per-share amounts. Crown has securities
outstanding which could potentially dilute basic earnings per share in
the future that were not included in the computation of earnings per
share because of their antidilutive impact. Potentially dilutive shares
are issuable under the terms of convertible preferred stock agreements,
warrants and contingent share agreements.
The earnings per share for the quarter ended September 30, 1997 is
computed based on the income applicable to Crown's common stock divided
by the weighted average number of common shares outstanding during the
period. The weighted average shares outstanding for basic earnings per
share calculations were 10,361,233 shares. The weighted average shares
outstanding for diluted earnings per share
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for the quarter ended September 30, 1997 were 15,876,693 shares.
Potentially dilutive shares included in the weighted average number of
shares for the quarter ended September 30, 1997 were for stock
warrants and options, convertible preferred shares, and contingent
share agreements.
3. Receivables
-----------
Receivables consist of the following at September 30, 1998 and December
31, 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Trade $ 1,344,712 $ 1,702,306
Affiliates 475,619 -
Shareholders 395,692 -
----------- -----------
Total 2,216,023 1,702,306
Less: Allowance for doubtful accounts (110,000) (30,000)
----------- -----------
Receivables - net $ 2,106,023 $ 1,672,306
=========== ===========
</TABLE>
The affiliate receivable is for management fees due from a joint
venture in which the company has a 50% investment interest. Management
fees billed to the affiliate during the third quarter and for the nine
months ended September 30, 1998 were approximately $449,000 and
$512,000 respectively. The shareholder receivables reflect pro rata
offering costs due under the Strategic Realty Capital Corp.
cost-sharing arrangement (see Note 7).
4. Property & Equipment
--------------------
Property and equipment consists of the following at September 30, 1998
and December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land $ 271,845 $ 271,845
Building and improvements 1,137,112 1,137,112
Furniture and equipment 1,275,185 1,199,304
----------- -----------
Total property and equipment 2,684,142 2,608,261
Less accumulated depreciation (935,300) (769,936)
----------- -----------
Property and equipment - net $ 1,748,842 $ 1,838,325
=========== ===========
</TABLE>
5
<PAGE> 8
5. Stockholders' Equity
--------------------
In March 1997, the company entered into a stock purchase agreement with
an affiliate of the Harbert Management Corporation to invest up to $5
million in the company's common stock. Harbert invested $1 million in
the company in March 1997 and additional sums in October and December
1997. On December 31, 1997 the company and Harbert entered into an
amendment to the agreement pursuant to which Harbert agreed to purchase
one share of the company's Series AA Non-Voting Convertible Preferred
Stock on the terms and conditions set forth in the amendment. Harbert
Fund is entitled to a non-cumulative dividend at the rate of 5% per
annum plus, in the event of liquidation, a 12% cumulative dividend on
the liquidation preference of $3,647,185, each from January 26, 1998,
the date the transaction was consummated. The holder of the Series AA
Preferred has the option to convert it into 3,473,510 shares of common
stock at any time. The quoted price per common share of the Company at
the date of issuance of the Series AA Preferred was $1.625, resulting
in an effective dividend upon issuance of $1,997,268. Crown has the
option to convert the Series AA Preferred upon the occurrence of
certain stipulated events. The Series AA Preferred provides that if
these stipulated events did not occur as of June 30, 1998, then Harbert
has the right to designate a majority of Crown's Board of Directors
until such time that they do occur. The stipulated events have not yet
occurred and Harbert has not given notice of its intent to exercise its
right to designate a majority of the directors.
In March 1998, the company entered into a stock purchase agreement with
an affiliate of ContiFinancial Corporation whereby Conti invested $2
million in exchange for one share of the company's Non-Voting Series BB
Convertible Preferred Stock on the terms and conditions set forth in
the agreement, and a warrant to purchase up to 200,000 shares of
Crown's common stock at $2 per share. The warrant vests and expires
based upon the occurrence of certain stipulated events and was
determined to have an immaterial value. The liquidation preference is
$2,000,000, plus a 12% cumulative dividend from the issuance date. The
holder of the Series BB Preferred has the option to convert it into
1,000,000 shares of the common stock at any time. The quoted price per
common share of the Company at the date of issuance of the Series BB
Preferred was $2.50, resulting in an effective dividend upon issuance
of $500,000. The company has the option to convert the Series BB
Preferred upon the occurrence of certain stipulated events. The company
has the right to redeem the Series BB Preferred upon thirty days'
written notice for the liquidation preference provided, however, that
upon receipt of a redemption notice, the holder of the Series BB
Preferred has the right to convert the Series BB Preferred into
1,000,000 shares of common stock. Conti has the right to designate one
director of Crown's Board of Directors as long as it holds the Series
BB Preferred or at least 1,000,000 shares of common stock and certain
other conditions are met.
6. Contingencies
-------------
Crown has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes
that the probable resolution of such contingencies will not materially
affect the financial statements of the company.
6
<PAGE> 9
7. SRCC Offering Charge
--------------------
The company cosponsored Strategic Realty Capital Corp. ("SRCC") which
on March 24, 1998 filed with the SEC a registration statement for an
initial public offering. SRCC was intended to be a real estate
investment trust making high-yield commercial and multifamily real
estate loans and investments. Crown was to manage the operations of
SRCC, subject to the supervision of SRCC's board of directors.
Concurrent with the initial public offering, Crown would have purchased
an additional 133,333 shares (2% of the aggregate common stock) of SRCC
at the initial public offering price, which was estimated to be $15 per
share. Upon the closing of the offering of common stock of SRCC, Crown
would have issued a warrant to SRCC for the purchase of 2,000,000
shares of common stock at $2.50 per share. Crown would also have
invested cash of $2,000,000 in SRCC. The company owns all 100 issued
shares of SRCC.
Due to presently unfavorable market conditions for publicly traded
REITs, Crown does not anticipate that SRCC's public offering will
proceed now or in the foreseeable future. The charge of $851,452
reflects the company's portion of expenses related to SRCC's planned
public offering pursuant to a cost-sharing arrangement with the
co-sponsors.
8. Statements of Financial Accounting Standards
--------------------------------------------
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". The Company will, as required, implement the
provisions of the statement in the quarter ending March 31, 1999. The
Company's current disclosures are in compliance with the requirements
of the statement.
FASB has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes Statement No. 14
"Financial Reporting for Segments of a Business Enterprise". Generally,
this statement requires financial information to be report on the basis
that is used internally for evaluating segment performance and deciding
how to allocate resources. The Company will implement the provisions of
this statement, as required, for the year ended December 31, 1998.
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. The Company will be required to implement the provisions of
this statement beginning January 1, 2000. The Company does not
anticipate that adoption of this statement will materially impact its
financial position, results of operations or cash flows.
9. Supplemental Cash Flow Disclosures
----------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash paid for interest $ 134,497 $ 207,720
=========== ===========
Non-cash investing and financing activities:
Corporate acquisitions:
Accounts Receivable $ 16,983
Restricted cash 1,358,735
Other assets 591,137
Loan loss reserve (360,000)
-----------
Net cash paid for corporate acquisitions $ 1,606,855
===========
</TABLE>
7
<PAGE> 10
10. Restated Earnings per Share
---------------------------
Subsequent to the issuance of the Company's financial statements for
the nine-month period ended September 30, 1998, management determined
that the Series AA and Series BB Preferred Stock issuances contained
beneficial conversion features of $1,997,268 and $500,000 respectively.
The resulting discount of $2,497,268 is recognized as preferred stock
dividends at the date of issuance since they were immediately
convertible into common shares, resulting in a reduction of net income
(loss) available to common shareholders. There is no effect on net
income as originally reported. As a result of the restatement, the
accompanying financial statements for the nine-month period ended
September 30, 1998 have been restated. The net loss available to common
shareholders has been increased to $3,335,944 ($0.31 per share) from
the previously reported $838,676 ($0.08 per share).
8
<PAGE> 11
Item 2. - Management's Discussion and Analysis
- ----------------------------------------------
THE COMPANY'S BUSINESSES
Crown NorthCorp derives its primary revenues from the financial services it
offers to owners and operators of commercial real estate interests. These
services include third-party asset management, loan servicing, mortgage loan
originations and European operations. Fees the company receives include asset
management and disposition fees, incentive fees based on the overall performance
of a contract or pool of assets, loan servicing fees and fees associated with
the origination of mortgage loans. The company utilizes strategic acquisitions
and alliances as the primary means of expanding and diversifying its core
businesses and developing and entering new businesses. Management is actively
pursuing additional acquisitions and alliances to augment its core businesses.
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 21E of the Exchange
Act, including statements regarding the company's expectations, hopes,
intentions or strategies regarding the future. Forward-looking statements
include terminology such as "anticipate," "believe," "has the opportunity,"
"seeking to," "attempting," "would," "contemplated," "believes" or comparable
terminology. All forward-looking statements included in this document are based
on information available to the company on the date hereof, and Crown assumes no
obligation to update any such forward-looking statements. It is important to
note that the company's actual results could differ materially from those in
such forward-looking statements. The factors listed below are among those that
could cause actual result to differ materially from those in forward-looking
statements. Additional risk factors are listed from time to time in the
company's reports on Forms 10-QSB, 8-K and 10-KSB.
Among the risk factors that could materially and adversely affect the future
operating results of the company are:
* The company continues to experience operating deficits or marginally
profitable results. Management anticipates that marginal operating
results, including operating deficits, will continue until the company
is able to increase its revenues by securing additional asset
management and servicing contracts or by other means, including the
origination of mortgage loans.
* The company has been a correspondent in the loan conduit program of
ContiTrade Services L.L.C., an affiliate of Conti. Conti has advised
the company and its other correspondents that it is indefinitely
suspending this conduit program due to uncertainties in the markets for
commercial mortgage backed securities ("CMBS"). There can be no
assurance that the company will resume operations under this conduit
program. Crown continues its efforts to develop and expand its mortgage
loan capability by actively pursuing additional lending sources,
strategic acquisitions and
9
<PAGE> 12
alliances and expanded product lines. These efforts may be
unsuccessful which, in turn, may adversely affect the company's
revenue and profitability.
* The company does not anticipate that the public offering contemplated
by SRCC's registration statement will proceed now or in the foreseeable
future. Until such time, if ever, as this offering or a similar fund
opportunity does close and become effective, Crown will be unable to
derive benefits it had anticipated from a management agreement with and
an investment in such an opportunity.
* Under the terms of the Series AA Preferred, since June 30, 1998,
Harbert has had the right to designate a majority of Crown's Board of
Directors until certain specified events occur. The company does not
anticipate being able to cause the events to occur in the near future.
* Most of the company's asset management contracts are for an indefinite
term, cancelable upon thirty days' notice. If a significant number of
these contracts are terminated or modified, this may adversely affect
the company's revenues and profitability.
* Crown currently operates as a rated servicer. If the company no longer
received ratings, or if its ratings were downgraded, its ability to
retain existing business and to obtain new business in many commercial
real estate markets could be limited.
* Crown may be unable to develop sufficient capital resources through
profitable operations, strategic alliances or acquisitions or otherwise
to more successfully compete with larger and better capitalized
competitors in the acquisition of new business.
* The Year 2000 problem has not presented significant issues for the
company. Crown does not anticipate that costs associated with resolving
remaining issues will have a material financial impact. If, however,
the company and the parties with which it does business are not
successful in resolving remaining issues, Crown may have service
interruptions or material expenditures related to the Year 2000
problem.
OUTLOOK
BUSINESS ENVIRONMENT. Crown provides comprehensive financial services to owners
and operators of commercial real estate interests. In recent years, investments
in commercial real estate have, to an increasing degree, been made through
capital markets transactions, including CMBS transactions. During the third
quarter of 1998, major portions of these capital markets, in particular the
below-investment-grade components of CMBS, became substantially illiquid. Crown
believes that changing capital markets present opportunities to expand its asset
management and servicing businesses to investors seeking high yields through
commercial real estate. At the same time, Crown recognizes that these recent
capital markets developments have adversely affected the company's ability to
originate commercial mortgage loans in the near future. Crown has been
originating mortgage loans primarily through Conti's loan conduit program. Such
programs generally depend on an active CMBS market to provide an outlet for loan
production. Conti has indefinitely suspended its conduit program because of
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<PAGE> 13
market uncertainty. Until Crown resumes conduit lending or develops alternative
lending programs, mortgage loan originations will not be a primary source of
revenue.
THIRD-PARTY ASSET MANAGEMENT. The company's primary revenues continue to be
derived from management, disposition and incentive fees associated with
third-party asset management contracts with various clients, including
investment banking firms and partnerships. Assets under management include large
single assets, such as loans secured by hotels and office buildings, as well as
portfolios of commercial real estate assets and interests. Crown's principal
asset management client continues to place additional assets under the company's
management. The company is actively seeking to expand asset management revenues
through several means including development of new and existing client
relationships and European operations. Third-party asset management will
continue to be a primary source of the company's revenues.
One of the ways in which the company is seeking to expand its asset management
operations is through the management of high-yielding investment opportunities
including but not limited to the below investment grade portions of CMBS. The
planned public offering of SRCC presented one such opportunity. The company now
does not anticipate that this offering will proceed now or in the foreseeable
future. Crown continues to actively pursue opportunities in commercial and
multifamily real-property related assets including participation in high-yield
investment funds and alternative fund opportunities. There can be no assurance
that any fund will occur at any particular time or on any particular terms.
MORTGAGE LOAN ORIGINATION. Recent developments in the capital markets have
adversely affected Crown's mortgage loan origination program. Conti has
indefinitely suspended the loan conduit program that has been Crown's primary
means of originating loans. Additionally, when Conti sold loans of Crown and
other program correspondents into a securitization in August 1998, the company
recognized a pro rata loss of approximately $107,000 due to unfavorable market
conditions at that time. Management is presently exploring alternative means of
meeting the loan needs of its clients and otherwise expanding its commercial
lending program. There can be no assurance that any of these efforts will be
successful. Until such time as they are, mortgage loan origination will not be a
material source of income.
EUROPEAN OPERATIONS. In Europe, Catella/Crown NorthCorp Joint Venture AB, in
which the company has a 50% ownership interest, has entered into an agreement to
manage for Telereit Holding AB a portfolio of assets in Sweden valued at
approximately $614 million. Under this asset management agreement, Catella/Crown
has received a success fee for placing the transaction and will receive ongoing
management, disposition and incentive fees. With the commencement of work under
this agreement, the company's European Operations are based in Stockholm.
In conjunction with placing the Telereit transaction and entering into the asset
management agreement, the company agreed to make an equity investment in
Telereit. Crown did this by investing approximately $2.4 million in exchange for
a 14.23% ownership interest in HMR Sweden, LLC, an affiliate of Harbert. HMR
Sweden, in turn, invested approximately $16.8 million in Telereit and received a
13.09% ownership interest. Crown funded its investment
11
<PAGE> 14
through a combination of cash on hand and a loan of approximately $1 million
from MarRay Investment, LLC, another affiliate of Harbert. In consideration of
Harbert's investment in Telereit and the loan from MarRay, Crown has agreed to
pay Harbert 12.5% of the management and disposition fees and 37.5% of the
incentive fees it receives under the asset management agreement, net of Crown's
expenses. Through February 28, 1999, Crown has the option, under certain terms
and conditions, to have another party acquire Harbert's investment in Telereit
provided that Harbert receives a 25% return on its investment. As security for
the loan from MarRay, Crown has pledged to it a 5.94% ownership interest in HMR
Sweden. Additionally, a bank, on behalf of Crown, has issued letters of credit
aggregating approximately $625,000 to partially secure Telereit's obligations
under a credit facility.
LOAN SERVICING AND INFORMATION TECHNOLOGY. Loan servicing is a core business of
the company and an important source of revenue. The company has recently
acquired the servicing rights to additional assets and is actively seeking
further acquisitions. Standard & Poors and Fitch IBCA, Inc. both rate Crown
"above average" as a special servicer of assets. Rated special servicers manage
non-performing loans and foreclosed properties in securitized transactions. S&P
rates the company "average" as a commercial servicer; Fitch rates Crown
"acceptable" as a master servicer. These latter two ratings allow the company to
seek to expand its operations as a rated servicer to service performing as well
as non-performing portions of securitizations. Crown believes its capabilities
as a rated servicer to be a significant component of the company's business
development activities.
YEAR 2000 READINESS. The Year 2000 issue arises from computer programs
and equipment that use a two-digit rather than a four-digit format to
indicate a year. Such components may incorrectly interpret dates beyond
1999, which could cause computer system failures or errors. The company
has substantially completed the assessment of its Year 2000 issues. It
has purchased and will continue to purchase computer hardware and
software to help insure compliance. Finally, Crown has been testing and
will continue to test its systems for Year 2000 compliance.
Substantial portions of Crown's strategic computer systems and
applications are proprietary in nature. The company's assessment is
that these are Year 2000 compliant. The principal third-party system
the company uses is the McCracken Loan Servicing System. McCracken has
written software to correct Year 2000 issues, which is presently in
testing with Crown and other users of the system. Crown anticipates
this testing will be completed by the first quarter of 1999.
Additionally, Crown makes some use of standard commercial software
products. To the extent that present versions of these products
manifest Year 2000 problems, Crown will acquire Year 2000-compliant
versions of these products or substitute alternative products that do
comply.
To date, the costs the company has incurred specifically to address
Year 2000 issues have not been material. These expenditures have
included upgraded hardware for the McCracken system as well as enhanced
telephone and building security systems. Over and above regularly
scheduled purchases to keep pace with continuing technological
12
<PAGE> 15
advances, the company will purchase from operating funds extra supplies
of key computer hardware to insure its availability as the Year 2000
approaches. The company also has in place a disaster recovery plan
should it need to resume operations for a temporary or extended period
in an alternative location.
While Crown believes it is taking all appropriate steps to achieve Year
2000 compliance, the Year 2000 problem is pervasive and complex, as
virtually every computer operation will be affected in some way. Crown
believes that its testing of hardware and software components will
reveal any significant Year 2000 problems, that such problems will be
capable of remediation and that Crown's software and hardware will
perform substantially as planned when Year 2000 processing begins.
There can be no assurance, however, that Crown can achieve Year 2000
compliance without significant additional costs.
PREFERRED STOCK ISSUANCES. The company has issued one share of Series AA
Preferred to Harbert in exchange for $3,647,185 in cash. The Series AA Preferred
provides that, since certain trigger events did not occur by June 30, 1998,
Harbert has the right to designate a majority of the company's Board of
Directors until such time as the trigger events do occur. These trigger events
are, first, the closing of the public offering contemplated by the registration
statement filed by SRCC (or the closing of a comparable fund opportunity) and,
second, the company achieving certain specified commercial loan origination
volumes. The trigger events have not yet occurred and the company does not
anticipate being able to cause these events to occur in the near future. Harbert
has not given notice of its intent to exercise its right to designate a majority
of the company's Board of Directors.
Additionally, the company has issued one share of Series BB Preferred and
warrants to purchase up to 200,000 shares of common stock to an affiliate of
Conti in exchange for $2 million cash. Conti may convert the Series BB Preferred
into 1,000,000 shares of common stock at any time. Crown has the option to
convert the Series BB Preferred upon the occurrence of the trigger events. Given
present conditions in the financial markets, the company does not anticipate
being able to exercise a conversion option based on the trigger events.
Crown must continue to develop and enhance revenues from its core businesses to
overcome operating deficits and to sustain profitability. Recent changes in the
capital markets provide particular opportunities to expand the company's asset
management and servicing businesses. There can be no assurance that the company
will be successful in increasing its revenues or that any level of revenues will
produce any particular financial results.
RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO
THE THIRD QUARTER ENDED SEPTEMBER 30, 1997
Total revenues decreased $677,613 to $2,175,411 in the third quarter of 1998
from $2,853,024 during the same period in 1997. Revenue components changed
significantly, with incentive and disposition fees decreasing by $1,101,977 in
1998. Asset management contracts with various clients, including investment
banking firms and partnerships, continue to provide a
13
<PAGE> 16
significant portion of the company's revenue through management, disposition and
incentive fees. Pursuant to its strategic business plan, the company is
continuing to take steps to reposition Crown's core business to grow both those
businesses and new, related activities. Corporate acquisitions and European
development activities have been primarily responsible for new revenue sources
from equity investments in partnerships and joint ventures and from loan
servicing. Also, pursuant to the strategic business plan, loan origination
activities have generated new revenues during the year, although those revenues
have substantially declined recently because of illiquid CMBS market conditions.
The company anticipates that, at least in the near term, revenues from asset
management and servicing activities will be the largest components of total
revenues while revenues from lending activities will increase only as selected
opportunities develop.
Management fees are recorded as services required under a contract are
performed, and may be based on a percentage applied to the aggregate value of
the assets managed under a contract, a fixed fee or a cost-plus agreement.
Management fee revenues increased $139,250, or 16.7%, to $974,632 in the third
quarter of 1998 from $835,382 for the comparable period in 1997. The increase in
management fee revenues for the third quarter of 1998 versus the same period in
1997 is generally attributable to billings of approximately $449,000 to
Catella/Crown for asset management services on the Telereit transaction in
Sweden.
Certain contracts provide incentive fees if the company achieves net cash
collections in excess of contractually established thresholds. Disposition fees
are recorded as revenue when the disposition of an asset has been consummated
and the asset owner has received the gross proceeds from the disposition.
Disposition fees are generally based on a percentage of the proceeds of an asset
disposition, as defined by the contracts, or fixed amount per disposition.
Incentive and disposition fee revenues decreased to $194,540 in the third
quarter of 1998 from $1,296,517 during the corresponding period in 1997. The
1997 amount primarily reflects the resolution of assets under one contract and
fees on a large number of assets under the company's management that an
investment banking client placed into a securitized transaction.
Income from partnerships and joint ventures increased to $413,403 in the third
quarter of 1998 from $157,656 in the third quarter of 1997. The increase was
primarily from one-time success fees due to Catella/Crown for the placement of
the Telereit transaction.
Origination fees, interest and other fees reflect the generation of fees from
mortgage origination, loan servicing, accounting, and interest income net of
losses from the sale of certain loans into a securitization. Other fees
increased $29,367, or 5.2%, to $592,836, in the third quarter of 1998 from
$563,469 in the same period in 1997.
Personnel expenses include salaries, related payroll taxes and benefits, travel
and living expenses, and professional development expenses. Personnel expenses
decreased $280,529 or 15.3%, to $1,551,605 for the third quarter of 1998 from
$1,832,134 for the same period in 1997. The decreases were primarily caused by
the implementation of its strategic business plan whereby staffing was reduced
significantly in 1997, with resultant decreases in salaries, payroll taxes and
benefits expenses.
14
<PAGE> 17
Occupancy, insurance and other operating income expenses decreased $43,231, or
7.3%, to $548,552 for the third quarter of 1998 from $591,783 for the third
quarter of 1997. Corresponding with the corporate restructuring addressed above,
other occupancy, insurance and other expense components, including equipment
leases and other services, were restructured to reduce overall expenses.
The provision for loan losses reflects credit experience with the company's loan
servicing portfolio under the FNMA-DUS Program. There was no change in the
provision during the third quarter of 1998 or the corresponding period in 1997.
Amortization and depreciation increased $6,456 to $96,081 for the third quarter
of 1998 from $89,625 for the corresponding period in 1997.
Interest expense is generally incurred on the company's notes and bonds payable
and decreased $21,623 to $63,188 for the third quarter of 1998 from $84,811 for
the same period in 1997. The decrease primarily reflects the reduction in
short-term borrowings during 1997 utilizing proceeds from tax loss carryforwards
and cash generated from operations.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Total revenues decreased $1,784,981 to $5,612,759 in the first nine months of
1998 from $7,397,740 during the same period in 1997. Asset management contracts
with various clients, including investment banking firms and partnerships,
continue to provide a significant portion of the company's revenue through
management, disposition and incentive fees. Pursuant to its strategic business
plan, the company is continuing to take steps to reposition Crown's core
business to grow both those businesses and new, related activities. Corporate
acquisitions and European development activities have been primarily responsible
for new revenue sources from equity investments in partnerships and joint
ventures and from loan servicing. Also, pursuant to the strategic business plan,
loan origination activities have generated new revenues during the year,
although those revenues have substantially declined recently because of illiquid
CMBS market conditions. The company anticipates that, least in the near term,
revenues from asset management and servicing activities will be the largest
components of total revenues while revenues from lending activities will
increase only as selected opportunities develop.
Management fee revenues decreased $629,837, or 22.4%, to $2,180,508 in the first
nine months of 1998 from $2,810,345 for the comparable period in 1997.
Management fee revenues for the nine months of 1998 include billings of
approximately $512,000 to Catella/Crown for management services on the Telereit
transaction in Sweden. The decrease in management fee revenues for the first
nine months of 1998 versus the same period in 1997 is generally attributable to
the loss of a large number of assets under the company's management that an
investment banking client placed into a securitized transaction during 1997.
Additionally, management fees have decreased because of higher-fee contracts
being resolved and replaced with lower-fee contracts.
15
<PAGE> 18
Incentive and disposition fee revenues decreased to $1,386,263 in the first nine
months of 1998 from $3,067,942 during the corresponding period in 1997. The 1998
fees were primarily due to the progressive resolution of one contract. The 1997
amount primarily reflects the resolution of assets under one contract and fees
on a large number of assets under the company's management that an investment
banking client placed into a securitized transaction.
Income from partnerships and joint ventures increased to $460,802 in the first
nine months of 1998 from $292,914 in the first nine months of 1997. The increase
was primarily from one-time success fees due to Catella/Crown for the placement
of the Telereit transaction.
Origination fees, interest and other income increased $358,647, or 29.2%, to
$1,585,186 in the first nine months of 1998 from $1,226,539 for the same period
in 1997. The increase is primarily attributable to origination income resulting
from the commencement of loan origination activities in the second half of 1997.
Personnel expenses decreased $1,211,664, or 21.8%, to $4,356,434 for the first
nine months of 1998 from $5,568,098 for the same period in 1997. The decreases
were primarily caused by the implementation of its strategic business plan
whereby staffing was reduced significantly from 1997 levels, with resultant
decreases in salaries, payroll taxes and benefits expenses.
Occupancy, insurance and other operating expenses decreased $593,655, or 29.1%,
to $1,443,935 for the first nine months of 1998 from $2,037,590 for the first
nine months of 1997. During the first half of 1997, the company incurred charges
of approximately $311,000 for expenses relating to abandoned business
development activities. Corresponding with the corporate restructuring addressed
above, other occupancy, insurance and other expense components, including
equipment leases and other services, were restructured to reduce overall
expenses.
The recovery of the provision for loan losses of $674,000 reflects favorable
credit experience with the company's loan servicing portfolio under the FNMA-DUS
Program.
On March 24, 1998, the company, as a co-sponsor, filed with the SEC to register
shares of SRCC, a REIT, in an initial public offering. Due to the presently
unfavorable market conditions for publicly traded REITs, the offering has been
deferred. The company now does not anticipate that the offering will proceed now
or in the foreseeable future. The charge of $851,452 reflects the company's
portion of expenses related to SRCC's planned public offering pursuant to a
cost-sharing arrangement with the co-sponsors. The company is funding the costs
from cash reserves and amounts due from the co-sponsors.
During the second quarter of 1997, management implemented a restructuring plan
for the company's operations which, among other items, encompassed consolidating
offices and exiting certain lines of business. All restructuring charges were
recorded in the second quarter of 1997.
16
<PAGE> 19
The employment contract settlement of $206,563 in the first nine months of 1997
reflects a non-recurring charge representing the lump sum, final settlement of
incentive compensation payments otherwise due over time to a former employee.
Interest expense decreased $86,573 to $196,228 for the first three quarters of
1998 from $282,801 for the same period in 1997. The decrease primarily reflects
the reduction in short-term borrowings during 1997 utilizing proceeds from tax
loss carry forwards and cash generated from operations.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
Cash and cash equivalents increased to $2,433,823 at September 30, 1998 from
$735,940 at December 31, 1997. The company had aggregate bank credit facilities
of $600,000 of which $-0- was outstanding at September 30, 1998.
In March 1997, the company entered into a stock purchase agreement with an
affiliate of Harbert whereby Harbert agreed to invest up to $5 million in the
common stock. Harbert invested $1 million in the company in March 1997 and
additional sums in October and December 1997. On December 31, 1997, the company
and Harbert entered into and amendment to the agreement pursuant to which
Harbert purchased one share of the Series AA Preferred in exchange for cash of
$3,647,185. The company has utilized all proceeds received under this agreement,
as amended. (See Financial Statements - Notes 5 and 10).
In March 1998, the company entered into a stock purchase agreement with an
affiliate of Conti whereby Conti invested $2,000,000 in exchange for one share
of the Series BB Preferred and a warrant for 200,000 shares of the common stock.
The agreement presently calls for the company to use the proceeds received to
invest in SRCC (or a comparable fund opportunity) and to expand mortgage loan
origination operations. (See Financial Statements Notes 5 and 10).
The company has invested approximately $2.4 million in HMR Sweden, LLC, an
affiliate of Harbert, and received a 14.23% interest therein. HMR Sweden, in
turn, has a 13.09% ownership in Telereit, which holds a portfolio of assets in
Sweden valued at approximately $614 million. Crown funded its investment from
cash on hand and a loan of approximately $1 million from an affiliate of
Harbert.
The company had anticipated that, if the public offering of SRCC proceeded, it
would have invested $2 million in SRCC in exchange for common stock of SRCC. The
company would have funded this investment with proceeds from private investment
capital infusions. Also, in conjunction with a public offerings, the company
would have issued SRCC a five-year warrant to purchase up to $ 2 million of the
common stock at $2.50 per share. The company now does not anticipate this public
offering will proceed now or in the foreseeable future.
17
<PAGE> 20
Crown expects to fund current operations with cash provided by operations,
proceeds provided from private investment capital infusions, strategic alliances
and from draws on bank credit facilities. Through the implementation of the
strategic business plan discussed above, the company will continue its efforts
to reduce operating expenses. Moreover, the company is developing both new
sources of revenue in an effort to eliminate operating deficits as well as
alternative sources to fund those deficits.
Crown is actively seeking credit facilities to expand existing facilities, to
establish an advancing line for operations as a master servicer and to fund
acquisitions. The company is also actively pursuing private equity capital
infusions. The company expects to fund strategic acquisitions of entities and
asset portfolios by cash provided from debt or equity financing.
HISTORICAL CASH FLOWS
Cash flows provided in operating activities changed to a $755,065 use of cash
for the first nine months of 1998 from a $1,679,947 source of cash in the
corresponding period of 1997. The company's net loss for the first nine months
of 1998 includes a non-recurring charge for costs associated with the delayed
offering of SRCC and a non-cash credit for a reduction in the reserve for loan
losses. During the first nine months of 1997, the company incurred an operating
loss that was offset by increases in cash provided from changes in working
capital components, primarily from the collection of a tax refund receivable.
Cash flows used by investing activities increased to $3,986,041 for the first
nine months of 1998 from $1,857,623 for the same period in 1997. The additional
cash flows used in 1998 primarily reflects the company's co-investment in the
Telereit transaction, related increases in restricted cash associated with the
transaction, and an increase in shareholder receivables associated with the
delayed SRCC offering.
Cash flows provided by financing activities increased to $6,438,989 for the
first nine months of 1998 from $620,678 for the respective time period in 1997.
The increase is generally attributable to the issuance of the Series AA
Preferred and the Series BB Preferred in 1998 and the company having net
borrowings in 1998 as opposed to net loan payments in 1997.
Part II - OTHER INFORMATION
- ---------------------------
Item 1. - Legal Proceedings
- ---------------------------
The company is a party to routine litigation incidental to its business.
Management does not believe that the resolution of this litigation will
materially affect the financial position or liquidity of the company.
Item 2. - Changes in Securities
- -------------------------------
None
18
<PAGE> 21
Item 3. - Defaults Upon Senior Securities
- -----------------------------------------
None
Item 4. - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None
Item 5. - Other Information
- ---------------------------
The parties that sold Eastern Realty Corporation and its affiliates to the
company in 1996 have made a demand upon the company to register the 568,046
shares of common stock they hold as a result of that transaction. The company is
responding to this demand in accordance with the terms of the applicable
registration rights agreements.
Item 6. - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits
Exhibit
Numbers
-------
10.75 Payment of Fees Agreement between Crown NorthCorp Euro A/S and
Harbert Management Corporation
10.76 Purchase Option Agreement among Crown NorthCorp, Inc., Harbert
Management Corporation and MarRay Investment, LLC
10.77 Convertible Secured Promissory Note executed by Crown NorthCorp,
Inc., payable to the order of MarRay Investment, LLC.
10.78 Pledge Agreement between Crown NorthCorp, Inc. and MarRay
Investment, LLC.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
19
<PAGE> 22
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.
CROWN NORTHCORP, INC.
Dated: April 7, 1999 By: /s/ Richard A. Brock
- -------------------- ---------------------------
Richard A. Brock, Senior Vice
President, Treasurer and
Chief Financial Officer
By: /s/ Ray L. Druseikis
--------------------------
Ray L. Druseikis, Controller
and Chief Accounting Officer
20
<PAGE> 23
INDEX TO EXHIBITS
-----------------
10.75 Payment of Fees Agreement between Crown NorthCorp Euro A/S and
Harbert Management Corporation (1)
10.76 Purchase Option Agreement among Crown NorthCorp, Inc., Harbert
Management Corporation and MarRay Investment, LLC (1)
10.77 Convertible Secured Promissory Note executed by Crown NorthCorp,
Inc., payable to the order of MarRay Investment, LLC. (1)
10.78 Pledge Agreement between Crown NorthCorp, Inc. and MarRay
Investment, LLC. (1)
27 Financial Data Schedule (2)
- ---------------------------------------------
(1) Incorporated by reference to Crown NorthCorp, Inc.'s Form 10-QSB
filed November 16, 1998.
(2) Filed herewith.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CROWN
NORTHCORP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS
OF SEPTEMBER 30, 1998 AND THE NINE MONTHS ENDED, AS AMENDED, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,433,823
<SECURITIES> 0
<RECEIVABLES> 1,344,712
<ALLOWANCES> (110,000)
<INVENTORY> 0
<CURRENT-ASSETS> 4,841,216
<PP&E> 2,684,142
<DEPRECIATION> 935,300
<TOTAL-ASSETS> 17,130,340
<CURRENT-LIABILITIES> 2,897,603
<BONDS> 3,962,532
2,000,000
2
<COMMON> 110,543
<OTHER-SE> 8,159,660
<TOTAL-LIABILITY-AND-EQUITY> 17,130,340
<SALES> 5,612,759
<TOTAL-REVENUES> 5,612,759
<CGS> 0
<TOTAL-COSTS> 5,323,755
<OTHER-EXPENSES> 851,452
<LOSS-PROVISION> 80,000
<INTEREST-EXPENSE> 196,228
<INCOME-PRETAX> (838,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (838,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (838,676)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
