U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
X Annual report under section 13 or 15(d) of the Securities Exchange
---
Act of 1934 (Fee required)
For the fiscal year ended February 28, 1997
--- Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from -------- to ----------.
Commission File Number: 33-2749
FIRST MORTGAGE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Utah 87-0320209
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
257 East 200 South, Suite 950, Salt Lake City, Utah 84111
- --------------------------------------------------- -------
(Address of Principal Executive Offices) Zip Code
(801) 363-7663
--------------------
(Registrant's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
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 NO X
----- -----
Indicate by check mark if there is disclosure of delinquent filers in
response to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. N/A
------
The aggregate market value of the voting stock held by non-affiliates
(17,389,005 shares) based upon the price at which the stock was sold, as
reported by management of the issuer, was approximately $325,000.
The number of shares of Common Stock of the issuer outstanding as of
July 11, 1997 was 51,101,680.
Documents Incorporated by Reference
A portion of the exhibits in Part III of the issuer's registration
statement on Form S-18 is incorporated by reference into Part III of this
Form 10-K.
TABLE OF CONTENTS
Page
------
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 4
PART II
Item 5. Market For Registrant's Common Equity
and Related Stockholder Matters. . . . . . . . . . . . . . . . . 4
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 5
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . 6
Item 9. Changes in Disagreements With Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . . 7
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 7
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 8
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .10
PART I
ITEM 1. BUSINESS
General
- -------
First Mortgage Corporation (the "Company") was organized under the
corporation laws of the State of Utah on March 1, 1977, for the purpose of
engaging in the real estate mortgage business, related activities, and
other general purposes. The Company is currently engaged in the
acquisition of interests in non-performing loan packages from various
government and private financial organizations. Following acquisition of
such loan packages, the Company attempts to collect such loans. In
addition, the Company owns and manages commercial real estate located in
Pocatello, Idaho, and Phoenix, Arizona. (See Item 2. Property.)
Industry Background
- -------------------
The Federal Deposit Insurance Corporation (the "FDIC") was organized
in part to insure against failing financial institutions. In this capacity
the FDIC often takes over failing financial institutions and liquidates the
assets of the particular financial institution, including packages of loans
either originated from the financial institution or serviced by such
institution.
In the mid-1980s many savings and loan institutions failed for various
reasons. The Resolution Trust Corporation (the "RTC") was created to
liquidate these savings and loan institutions, and in many cases to sell
off packages of loans held by such savings and loan facilities.
Many private financial institutions such as financing and mortgage
companies also liquidate loan packages for many reasons, including loan
packages which have performed poorly.
In most instances the FDIC, RTC, and private financial institutions
will place these loan packages for sale either on a sealed bid basis or in
an auction proceeding. Investors have an opportunity to review the
particular loan packages and bid on such packages. Generally, such
packages are sold to the highest bidder and payment is required within a
reasonably short period.
Business of the Company
- -----------------------
Since the mid-1980s the Company has been engaged primarily in the
business of bidding on and collecting delinquent and other loans purchased
from the FDIC, the RTC, and private financing companies. Mr. Greaves, the
president of the Company, has been principally responsible for the
evaluation of loan packages and bidding for the purchase of such packages.
Generally, the Company receives notice of loan packages through direct
mailings to the Company or through advertisements in trade journals or
newspapers. Each loan package consists of from a few to several hundred
non-performing individual loans, with most loan packages consisting of from
ten to fifty such loans. After determining for which loan packages to bid,
Mr. Greaves will visit the site of the financial institution holding the
loan package and review the books and records relating to the particular
loan package.
- 1 -
The bidding process for the various loan packages will vary depending
upon the type of financial institution involved. Generally, the Company
will determine the potential for successful collection and will estimate
the cost of collection, including the location of the originating loans.
Based upon the information developed from this process, the Company will
place a bid with the financial institution or will attend the auction and
bid on the package. Management believes that it is successful in
approximately twenty percent of the bids made for loan packages, or parts
of such loan packages.
Financing for the acquisition costs of the particular loan packages is
furnished in part by funds provided by the Company and by others in joint
venture arrangements on each individual loan package. In general, the
Company will seek from ten to fifty percent participation by such joint
venture partners. Typically, the Company has entered into joint venture
arrangements with Eiger Enterprises, Ltd. a limited partnership affiliated
with Susan and Bryce Wade, beneficial owners of in excess of five percent
of the outstanding shares of the Company. (See Item 12. Security
Ownership of Certain Beneficial Owners and Management, and Item 13. Certain
Relationships and Related Transactions.)
The Company handles all collection procedures in-house, except where
legal action is required to collect delinquent loans. In such instances
the Company engages local attorneys to bring collection actions in the city
in which the debtor is located.
Competition
- -----------
The Company competes against a number of companies which are better
financed and have more employees than the Company. There are a number of
much larger companies which compete in acquiring loan packages involving
first mortgages on single family dwellings; however, the Company does not
bid on such packages.
Management believes that the number of available loan packages from
failed financial institutions is becoming very limited. Most of the
savings and loan institutions have been fully liquidated and the number of
banks which fail is fewer than in previous years. Consequently, the
Company has fewer loan packages for which it can bid, and the competition
for, and cost of, such packages is becoming greater.
Regulation
- ----------
On September 20, 1977, Congress enacted the Federal Fair Debt
Collection Practices Act, codified at 15 U.S.C. Section 1692, et seq.(the
"Act"), and amended it in 1986. The Act extends its protection only to
certain persons, and applies its prohibitions only to certain debt
transactions and to a limited category of persons or entities collecting
debts. In general, the protections of the Act are extended only to
consumers who are natural persons who incurred debt for personal, family,
or household purposes. In other words, the Act does not apply to the
collection of commercial or business debts. Also, the Act does not apply
to debt collectors who collect debts for themselves rather than for others.
Only a small number of the debts collected by the Company involve
consumer debts. Also, all of the loan packages are collected for the
benefit of the joint venture which owns the loan package. Therefore, the
Company does not believe that the Act applies to the operations of the
Company, even in connection with the collection of consumer debts.
A number of states have enacted similar debt collection legislation.
The Company believes that it is either exempt from such legislation or it
is in compliance with such laws.
Employees
- ---------
As of July 11, 1997, the Company had no full-time employees. Mr.
Greaves, the President of the Company devotes approximately one-half of his
time to the business of the Company. (See Item 10. Directors and Executive
Officers of the Registrant.)
Patents and Trademarks
- ----------------------
The Company does not own any patents or trademark rights.
ITEM 2. PROPERTY.
Office Space
- ------------
The principal executive offices of the Company are located at 257 East
200 South, Suite 950, Salt Lake City, Utah, and consists of approximately
1,000 square feet of office space which it sublets on a month to month
basis for $725 per month from DeWaal, Keeler & Company, Certified Public
Accountants. (See Item 13. Certain Relationships and Related
Transactions.)
Idaho Property
- --------------
The Company owns an eighty percent (80%) interest as a tenant in
common with an unrelated third party in approximately 5.58 acres of
undeveloped commercial real property located in Pocatello, Idaho. During
the fiscal year ended February 28, 1993, the Company partitioned the land
previously owned by the Company by exchanging its tenant in common interest
in approximately twelve acres adjoining the present acreage for the
existing tenant in common interest in a parcel which consists of frontage
property on the corner of Center Street and the on-ramp to Interstate 15 in
downtown Pocatello, Idaho.
The Company currently intends to sell or lease the property for
commercial development; however, the Company does not intend to develop the
land itself or to operate any business on the property. The Company has no
formal or written agreement with the holder of the remaining twenty percent
interest in the property, and any decision to sell or lease the land would
need to be done in conjunction with such party. The president of the
Company has had a long-standing business relationship with such party and
therefore believes that the Company will be able to reach an equitable
arrangement with such party should the Company decide to sell or lease the
property. In addition, the Company has agreed to cooperate in any
development of the property which may include the adjacent parcel in which
the Company previously held an interest, but no formal agreement has been
discussed or reached.
- 3 -
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor any of its properties is a party to any
material pending legal proceedings, including any material bankruptcy,
receivership, or similar proceeding. Management of the Company does not
believe that there are any material proceedings to which any director,
officer or affiliate of the Company, any owner of record or beneficially of
more than five percent of the common stock of the Company, or any associate
of any such director, officer, affiliate of the Company, or security holder
is a party adverse to the Company or has a material interest adverse to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the year ended
February 28, 1997, to a vote of the security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock of the Company is not currently traded, and there is
no established public trading market for the Common Stock. There are no
market markers in the Common Stock. Management believes that there exists
a very limited or no degree of liquidity associated with the stock.
Management is not aware of actual trading volumes in the stock for the most
recent two fiscal years or since the end of the most recent fiscal year.
In addition, management is not able to provide the high and low bid
quotations since no market trades are known by management to have occurred
during the prior two fiscal years or since the end of the most recent
fiscal year.
As of July 11, 1997, there were approximately 300 holders of record of
the Common Stock of the Company as reported to the Company by its transfer
agent.
The Company has not declared any cash dividends on any class of common
equity for the last two fiscal years or subsequent to the most recent
fiscal year end. The Company does not anticipate declaring or paying any
dividends in the foreseeable future.
- 4 -
ITEM 6. SELECTED FINANCIAL DATA.
02/28/97 02/29/96 02/28/95 02/28/94 02/28/93
---------- ---------- ---------- ---------- ----------
Income Statement Data
Revenue $ 59,908 $ 98,161 $ 131,529 $ 153,493 $ 210,432
Operating Expenses 96,744 87,607 84,118 77,930 107,066
Income from
Operations (39,836) 10,554 47,111 75,563 103,366
Interest (Loss)
Expenses 3,753 1,120 4,287 2,143 1,887
Provisions for Taxes (4,741) 3,419 9,422 16,108 25,734
Net Income (Loss) (35,095) 9,654 37,689 57,312 75,745
---------- ---------- ---------- ---------- ----------
Earnings Per Share 0.00 0.00 0.00 0.00 0.00
Shares Outstanding 51,101,680 51,101,680 51,101,680 51,101,680 51,101,608
Balance Sheet Data
Cash & Cash Equivalent 470,153 340,577 435,781 374,370 429,214
Total Assets $ 553,575 $ 730,367 $ 761,587 $ 545,523 $ 508,090
Total Debt -0- 141,697 182,571 4,196 22,585
Shareholders'
Equity 553,575 588,670 579,016 541,327 484,015
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Result of Operations
- --------------------
The Company earns revenues from the collection of contracts purchased
primarily from the RTC and the FDIC, as well as from private financial
institutions. Contracts are purchased by competitive bids on packages of
loans from failed savings and loan and other financial associations. Loan
packages are awarded to the highest bidder and such bidder must take all
loans included in the package. There is no recourse or other guarantee
that any of the loans can be collected or that the Company will be able to
recover its costs in the package of loans.
Loan packages vary in size in the number of loans included and the
potential dollar amount of recovery. When the Company wishes to share the
risk of collection of the loan packages, it will enter into arrangements
with other investors. When these arrangements are made, both the Company
and the other investors receive proportionate interest in the proceeds.
- 5 -
The Company does not recognize income of any specific loan packages
until such time as the entire investment is recovered. Since the Company
has no recourse or other guarantee on the collect ability of the loan
packages, and since as a general rule there is no market for factoring or
marketing the loans individually, the fair market value of the loan
packages is undeterminable and is presented on the financial statements at
its cost, less amounts collected.
The Company's business is affected by general economic conditions. As
failure rates of savings and loan associations or other regulated banking
institutions improve, the availability of loan packages decreases and the
competition becomes more intense for the available packages. These factors
create uncertainty as to the Company's ability to acquire economical loan
packages with acceptable risk factors.
Liquidity and Capital Resources
- -------------------------------
The Company's cash requirements consist principally of working
capital, and payment of principal and interest on its outstanding
indebtedness. The Company has no plans for capital expenditures. At
February 28, 1997 and February 29, 1996, the Company had working capital of
$509,325 and $561,449, respectively. Cash and cash equivalents balances
were $470,153 and $340,577, respectively. The Company's growth in working
capital at February 29, 1997, and February 28, 1996, was attributable to
its operations. Operations accounted for all increases in cash flows for
the years ended February 29, 1997 and February 28, 1996.
The Company believes that cash from operating activities will be
sufficient to finance its activities for its fiscal year ending February
28, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are attached hereto and
incorporated herein:
Page
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . .F-2
Balance Sheets for the years ended February 28, 1997
and February 29, 1996. . . . . . . . . . . . . . . . . . . . . . . . . .F-3
Statements of Operations for the years ended February
28, 1997, February 29, 1996 and February 28, 1995. . . . . . . . . . . .F-5
Statement of Stockholders Equity from March 1, 1993
to February 28, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . .F-6
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . .F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
- 6 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information is provided for each of the executive
officers and directors of the Company:
WILLIAM S. GREAVES has been the President and a Director of the
Company since 1977. Mr. Greaves devotes approximately half of his time to
the business of the Company. Since approximately 1980, he has been the
president of Green River Development Associates, Inc., a privately held
company engaged in providing retail services to long-haul truckers. Mr.
Greaves received his bachelor of science degree in 1966 in sociology and
business from Utah State University, and his masters of public
administration in 1970 from the University of Southern California. Age 52.
STANLEY R. DE WAAL has been the Secretary and Treasurer of the Company
since 1977 and has been a Director of the Company since 1977. He is
certified public accountant and a senior partner in DeWaal, Keeler &
Company, Certified Public Accountants, which has been his principal
occupation for at least the past five years. (See Item 13. Certain
Relationships and Related Transactions.) Age 62.
DONALD L. SMITH has been a Director of the Company since 1977. From
1975 to 1991 Mr. Smith was the owner of Smith Agency/Insurance Associates,
an independent insurance agency. Since 1991 he has been an insurance agent
for ATP Insurance, Inc., an independent insurance agency. Age 63.
The Company believes that the potential success of the business of the
Company is significantly dependent upon the services of its current
president, Mr. Greaves. The Company has no employment agreement with Mr.
Greaves and carries no life insurance upon his life. In addition, if Mr.
Greaves leaves the Company, he is not prohibited by any contract from
competing with the Company in its business ventures. The Company believes
that the loss of the services of Mr. Greaves could have a material negative
impact upon the current business of the Company.
The term of office of each director is one year and until his
successor is elected at the annual meeting of the Company and qualified.
The term of office for each officer of the Company is at the pleasure of
the Board of Directors. The Board of Directors has no nominating, auditing
or compensation committee. The Bylaws of the Company provide that the
annual meeting of the stockholders shall be held on the third Friday in
March of each year or at such other time as the Board of Directors may from
time to time determine. There are no arrangements or understandings
between any of the officers or directors and any other person(s) pursuant
to which such officer or director was selected as an officer or director.
There are also no family relationships between any director or executive
officer of the Company.
During the most recent fiscal year ended February 28, 1997, the
Company did not have a class of equity securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended. Therefore,
no Forms 3,4, or 5 were filed during such year.
- 7 -
</Page>
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the aggregate executive compensation
paid by the Company for the fiscal years ended February 28, 1997, February
29, 1996 and February 28, 1995.
Annual Compensation Long-Term Compensation
--------------------------------- -------------------------
Awards Payouts
------------------ --------
Restric- All
Name and Annual cted Other
Principal Compen- Stock Options LTIP Compen-
Position Year Salary Bonus sation Award(S) /SARs Payouts sation
- ----------- ------ ------- ----- ------- -------- ------- ------- -------
William S. (1)
Greaves 1997 --- --- $60,500 --- --- --- ---
1996 --- --- 38,600 --- --- --- ---
1995 --- --- 35,857 --- --- --- ---
(1)Mr. Greaves' received this compensation as commission on individual
packages of loans managed by the Company.
Mr Greaves' compensation is determined on the basis of each individual
loan package purchased by the Company. In general, Mr. Greaves receives
from approximately twenty to forty percent of the proceeds of the loan
packages after the initial purchase price for the package is collected and
paid to the Company and the other joint venture investors.
No other executive officer of the Company received any compensation
exceeding $100,000 for the fiscal years ended February 28, 1997 and
February 29, 1996 and February 28, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information concerning the
stock ownership as of August 31, 1995, of (I) each person who is known to
the Company to be the beneficial owner of more than 5 percent of the
Company's Common Stock; (ii) all directors; (iii) each of the executive
officers; and (iv) directors and executive officers of the Company as a
group:
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- ----------------- ------------------------ -------------------- --------
Common Stock William S. Greaves 25,601,100 50.08%
($.001 par value) 2924 LaJoya Drive
Salt Lake City, UT 84124
Common Stock Stanley De Waal -0- *
($.001 par value)
Common Stock Donald L. Smith 25,000 *
($.001 par value)
Common Stock Susan and Bryce Wade 8,086,575 15.82%
($.001 par value) 2205 Pheasant Way
Salt Lake City, UT 84121
Common Stock Directors and Executive 25,626,100 50.12%
($.001 par value) Officers as a Group
(3 Persons)
- 8 -
</Page>
* Represents less than one percent of the total outstanding shares.
There are no arrangements, known to the Company, the operation of
which may at a subsequent date result in a change of control of the
Company. However, the Company is seeking additional business ventures, the
acquisition of which could result in a change of control of the Company.
The Company presently has not entered into any arrangements with any party
in connection with a potential acquisition.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company sublets its principal executive offices from DeWaal,
Keeler & Company, Certified Public Accountants. Mr. DeWaal, an officer and
director of the Company, is a senior partner in such accounting firm.
Management believes that the price paid for such space is equal to or less
than would be paid for similar space from a non-affiliated third party.
The Company has no written contract for such services. (See Item 2.
Property and Item 10. Directors and Executive Officers of the Registrant.)
These shares are held of record by W.S. Greaves & Associates, Inc., a
company controlled by Mr. Greaves. Mr. Greaves is the sole shareholder,
officer, and director of this company.
These shares are held of record by Fay B. Smith, the wife of Mr.
Smith. Mr. Smith is deemed to share beneficial ownership in such shares
with his wife by virtue of such relationship.
These shares are held of record by Eiger Enterprises, Ltd., a family
limited partnership. Eiger, Inc., a company owned by Mrs. Wade, is the
general partner of such limited partnership. Mr. and Mrs. Wade are husband
and wife, and therefore, Mr. Wade is deemed to share beneficial ownership
in such shares with his wife by virtue of such relationship, although he
has no legal ownership in such shares.
DeWaal, Keeler & Company, Certified Public Accountants, provides
accounting services for the Company. Mr. DeWaal, an officer and director
of the Company, is a senior partner in such accounting firm. Management
believes that the price paid for such accounting services is equal to or
less than would be paid for similar services from a non-affiliated third
party. The Company has no written contract for such services. (See Item
10. Directors and Executive Officers of the Registrant.)
DeWaal, Keeler & Company, Certified Public Accountants, provides
accounting services for Green River Development Associates, Inc., a company
controlled by Mr. Greaves, an officer and director of the Company. Mr.
DeWaal, an officer and director of the Company, is a senior partner in such
accounting firm. In addition, ATP Insurance, Inc., an independent
insurance agency affiliated with Mr. Smith, a director of the Company,
provides insurance products for Green River Development Associates, Inc.
(See Item 10. Directors and Executive Officers of the Registrant.)
- 9 -
</Page>
Stanley DeWaal, an officer and director of the Company, is the general
partner of Center Street Associates, Ltd. ("CSA"), a Utah limited
partnership which owns approximately 37.5 acres of the parcel of unimproved
real property which originally included the 5.58 acres of unimproved real
property in which the Company owns an 80% interest located in Pocatello,
Idaho. CSA was one of the parties, together with the Company and other
unrelated parties, which originally owned a percentage interest in the
entire tract which was reapportioned during the fiscal year ended February
28, 1993. In addition, CSA and the Company agreed to guaranty the owner of
an adjacent parcel that such property could be sold in an are's-length
transaction for not less than $100,000, or CSA would pay the difference
between the selling price and $100,000, but not to exceed $10,000. (See
Item 2. Property.)
Eiger Enterprises, Ltd. has currently, and has from time to time,
entered into arrangements with the Company in connection with the purchase
of loan packages. However, the Company has no written contracts in
connection with such arrangements. Eiger Enterprises, Ltd. is a limited
partnership the general partner of which is Eiger, Inc., a company
controlled by Susan Wade. Mrs. Wade and her husband, Bryce Wade, are
deemed the beneficial owners of in excess of five percent of the
outstanding shares of the Company. During the fiscal year ended February
29, 1996, Eiger Enterprises, Ltd. invested in such joint arrangements.
(See Item 1. Business, Item 2. Property, and Item 12. Security Ownership of
Certain Beneficial Owners and Management.) The Company provides to Mr.
Wade a nominal amount of office space at no charge; the Company has no
written contract for such arrangement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) See Item 8 above for a list of the financial statements filed as
a part of this report.
(b) The following exhibits are furnished with this Report as required
by Item 601 of Regulation S-K:
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</Page>
Exhibit No. Description of Exhibit Page
- ----------- --------------------------------------------- -------
3.1 Articles of Incorporation, as amended *
3.2 By-Laws of the Company currently in effect *
* Filed as an exhibit with the Company's registration statement on
Form S-18 effective November 7, 1986.
(c) No reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
- 11 -
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) 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.
FIRST MORTGAGE CORPORATION
/S/ William S. Greaves
By: ----------------------
Date: July 11, 1997 William S. Greaves, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ William S. Greaves
By:------------------------ Date: July 11, 1997
William S. Greaves,
Director, Chief Financial
Officer and Principal
Accounting Officer
/S/ Stanley R. DeWaal
By: ---------------------- Date: July 11, 1997
Stanley R. DeWaal, Director
/S/ Donald. L. Smith
By: ---------------------- Date: July 11, 1997
Donald L. Smith, Director
- 12 -
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Company has not furnished to its shareholders an annual report
covering the registrant's fiscal year ended February 28, 1997. No proxy
statement, form of proxy or other proxy soliciting material has been sent
to any of the registrant's security-holders with respect to any annual or
other meeting of the security-holders. The registrant has no immediate
plans to furnish any proxy material to its security-holders subsequent to
the filing of this annual report on Form 10-K. However, the Company
intends to furnish its shareholders an annual report for the year ended
February 28, 1997.
- 13 -
FIRST MORTGAGE CORPORATION
FINANCIAL STATEMENTS
February 28, 1997
&
February 29, 1996
F-1
/Letterhead/ Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite 300
Salt Lake City, Utah 84111
801-521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
---------------------------
Board of Directors
FIRST MORTGAGE CORPORATION
I have audited the accompanying balance sheets of FIRST MORTGAGE
CORPORATION, as of February 28, 1997 and February 29, 1996, and the related
statements of operations, stockholders' equity and cash flows for the years
ended February 28, 1997, February 29, 1996, and February 28, 1995. These
financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements
based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that my
audit provides a reasonable basis for my opinion.
In my opinion, the aforementioned financial statements present fairly,
in all material respects, the financial position of FIRST MORTGAGE
CORPORATION, as of February 28, 1997, and February 29, 1996, and the
results of its operations and its cash flows for the years ended February
28, 1997, February 29, 1996, and February 28, 1995, in conformity with
generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
June 25, 1997
F-2
FIRST MORTGAGE CORPORATION
Balance Sheets
February 28, 1997 and February 29, 1996
February February
28, 1997 29, 1996
----------- -----------
ASSETS
Current Assets
- --------------
Cash in Bank $ 48,153 $ 20,577
Cash in Savings 422,000 320,000
Other Receivables -0- 100,000
Contracts Receivable 34,430 260,441
Prepaid Taxes 4,742 2,128
----------- -----------
Total Current Assets 509,325 703,146
Fixed Assets
- ------------
Office Equipment -0- 55
Leasehold Improvements 610 750
----------- -----------
Total Fixed Assets 610 805
Other Assets
- ------------
Land - (Note #4) 43,640 26,416
----------- -----------
Total Other Assets 43,640 26,416
----------- -----------
TOTAL ASSETS $ 553,575 $ 30,367
=========== ===========
The accompanying notes are an integral part of these financial statements
F-3
FIRST MORTGAGE CORPORATION
Balance Sheets -Continued-
February 28, 1997 & February 29, 1996
February February
28, 1997 29, 1996
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ -0- $ 1,697
Taxes Payable -0- -0-
Notes Payable -0- 140,000
----------- -----------
Total Current Liabilities -0- 141,697
Stockholders' Equity
- --------------------
Common Stock, 100,000,000
Shares Authorized at $0.001 Par Value;
51,101,680 Shares Issued and Outstanding 51,102 51,102
Capital in Excess of Par Value 242,697 242,697
Retained Earnings 259,776 294,871
----------- -----------
Total Stockholders' Equity 553,575 588,670
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 553,575 $ 730,367
=========== ===========
The accompanying notes are an integral part of these financial statements
F-4
FIRST MORTGAGE CORPORATION
Statements of Operations
For the Fiscal Years Ended
February 28, 1997, February 29, 1996 & February 28, 1995
1997 1996 1995
----------- ------------ ----------
Revenues
- --------
Mortgage Recovery $ 35,000 $ 78,618 $ 95,935
Interest 19,849 16,653 14,136
Gain on Sale of Assets -0- -0- 10,791
Bad Debt Recovery 2,059 2,890 10,667
----------- ----------- -----------
Total Revenues 56,908 98,161 131,529
Expenses
- --------
Commission Expense 60,500 38,200 38,587
Interest Expense 3,753 1,120 4,287
Office Expense 6,272 8,387 5,453
Rents 9,276 8,700 8,710
Professional Fees 3,551 12,004 15,885
Telephone 4,031 1,995 1,731
Depreciation 195 394 586
Land Expense (Note #6) 1,000 6,629 2,337
Travel 7,379 2,515 6,131
Taxes 487 7,663 711
----------- ----------- -----------
Total Expenses 96,744 87,607 84,418
----------- ----------- -----------
Net Profit (Loss)
from Operations (39,836) 10,554 47,111
Other Income
- ------------
Net Rent Income -0- 2,519 -0-
----------- ----------- -----------
Net Income Before Taxes (39,836) 13,073 47,111
Income Taxes 4,741 (3,419) (9,422)
----------- ----------- -----------
Net (Loss) Profit After
Taxes $ (35,095) $ 9,654 $ 37,689
=========== =========== ===========
(Loss) Earnings Per Share (.00) .00 .00
Weighted Average Shares
Outstanding 51,101,680 51,101,680 51,101,680
The accompanying notes are an integral part of these financial statements
F-5
FIRST MORTGAGE CORPORATION
Statements of Stockholders' Equity
From March 1, 1993 to February 28, 1997
Additional
Common Stock Paid in Retained
Shares Amount Capital Earnings
-------------------------------------------------
Balance,
March 1, 1993 51,101,680 $ 51,102 $ 242,697 $ 190,216
Income for
Year Ended
February 28, 1994 57,312
-------------------------------------------------
Balance,
February 28, 1994 51,101,680 51,102 242,697 247,528
Income for
Year Ended
February 28, 1995 37,689
-------------------------------------------------
Balance,
February 28, 1995 51,101,680 51,102 242,697 285,217
Income For
Year Ended
February 29, 1996 9,654
-------------------------------------------------
Balance,
February 29, 1996 51,101,680 51,102 242,697 294,871
Loss for Year Ended
February 28, 1997 (39,095)
-------------------------------------------------
Balance,
February 28, 1997 51,101,680 $ 51,102 $ 242,697 $ 259,776
=================================================
The accompanying notes are an integral part of these financial statements
F-6
FIRST MORTGAGE CORPORATION
Statements of Cash Flows
For the Fiscal Years Ended
February 28, 1997, February 29, 1996 and February 28, 1995,
1997 1996 1995
----------- ----------- -----------
Cash Flows from Operating Activities
- ------------------------------------
Net Income (Loss) $ (35,095) $ 9,654 $ 37,689
Adjustments to reconcile net income
or (loss) to operating activities:
Depreciation 195 13,566 586
Changes in operating assets and
liabilities:
(Increase) in Prepaid Taxes (2,614) (2,128) -0-
(Increase) Decrease in Accounts
Receivable 100,000 (49,708) (49,626)
(Decrease) Increase in Accounts
Payable (1,697) (26,992) 28,689
Increase (Decrease) in Taxes
Payable -0- 15,480 2,705
----------- ----------- -----------
Net Cash (Used) Provided by
Operating Activities 60,789 (31,549) 20,043
Cash Flows from Investing Activities
- ------------------------------------
Purchase of Land (17,224) -0- (26,416)
Cash Received on Contracts 229,200 115,118 390,198
Investment in Contracts (3,189) (159,035) (475,638)
Non Cash Changes in Contracts -0- (81,797) -0-
Decrease in Partnership Interest -0- -0- 6,243
(Decrease) Increase in Notes
Payable (140,000) (6,981) 146,981
----------- ----------- -----------
Net Cash Provided by
Investing Activities 68,787 (132,695) 41,368
Cash Flows from Financing Activities
- ------------------------------------
Net Cash Provided by
Financing Activities -0- -0- -0-
----------- ----------- -----------
Increase (Decrease) in Cash 129,576 (95,204) 61,411
Cash at Beginning of Year 340,577 435,781 374,370
----------- ----------- -----------
Cash at End of Year $ 470,153 $ 340,577 $ 435,781
=========== =========== ===========
Expense Disclosures
- -------------------
Interest $ 3,753 $ 61,794 $ 4,287
Taxes -0- 3,419 4,722
The accompanying notes are an integral part of these financial statements
F-7
FIRST MORTGAGE CORPORATION
Notes to Financial Statements
NOTE #1 - Corporate History and Purpose
- ---------------------------------------
The Company was incorporated on March 1, 1977, under the laws of the
State of Utah and amended its articles of incorporation April 5, 1982.
The Company's purpose is to act as a Real Estate Mortgage Broker and
to take advantage of any legal business opportunity which appears to have
profitable potential for the Company.
NOTE #2 - Summary of Significant Accounting Policies
- ----------------------------------------------------
(1) Depreciation on assets is recorded using the straight-line method and
a 6 or 10 year life.
(2) The Company uses the accrual method of accounting.
(3) Revenues and expenses are recognized in the period in which the
activities occur.
(4) The Company has had no noncash financing activities.
(5) The Company considers all short term, highly liquid investments that
are readily convertible to known amounts, within ninety days as cash.
(6) Noncash Investing Activities.
In 1992, the Company exchanged its 50% undivided interest in 12.5
acres of Commercial land in Pocatello, Idaho for 80% of 5.58 frontage
in the same parcel.
(7) Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumpations that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
NOTE #3 - Public Offering of Common Stock
- -----------------------------------------
In 1987, the Company completed a public offering of 8,750,000 shares
of its authorized but unissued common stock to the public at $0.02 per
share. All costs associated with the public offering have been netted
against offering proceeds.
NOTE #4 - Commercial Land
- -------------------------
The Company is a common tenant with an undivided 80% interest in 5.58
acres of commercially zoned land in Pocatello, Idaho. The acreage is in
the Northeast quadrant of the intersection of Center Street and the I-15
Freeway. The location of the property is near Idaho State University and
across the street from the Intermountain Health Care facility. The land is
presently vacant, and has no encumbrances. Feasibility studies have been
done so that development might be undertaken.
F-8
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #5 - Depreciation of Fixed Assets
- --------------------------------------
The following is a summary of leasehold improvements and office
equipment at cost, accumulated depreciation, and depreciation expense.
Accumulated Depreciation
Cost Depreciation Expenses
Assets 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------
Leasehold Improvements $1,400 $1,400 $ 790 $ 650 $ 140 $ 140
Office Equipment 4,348 4,348 4,348 4,293 55 254
---------------------------------------------------
Total $5,748 $5,748 $5,138 $4,943 $ 195 $ 394
Depreciation for all fixed assets is computed using the straight-line
method with useful lives of 6 or 10 years on both classes of assets.
NOTE #6 - Accounts Receivable
- -----------------------------
The Company and an associated investor advanced to a third party
$25,00 each to purchase a loan package. The Company acted as broker for
the transaction and on March 21, 1995, received the $50,000, paid a
commission of $3,000 and returned to the associated investor $23,500. In
1996, the Company sold its position in a repossessed building in Phoenix,
Arizona, to an associated investor. The Company received $100,000 on
October 4, 1997.
NOTE #7- Land Expenses
- ----------------------
The Company paid expenses on the land described in Note #4 as follows.
1997 1996 1995
---------------------------------------------------------------
Taxes $ 487 $ 503 $ -0-
Engineering & Legal -0- 4,126 -0-
Management 1,000 2,000 2,337
----------------------------
Total Expenses $ 1,487 $ 6,629 $ 2,337
NOTE #8 - Resolution Trust Contracts
- ------------------------------------
The Company has purchased from the Resolution Trust Corporation, and
the F.D.I.C. loan packages. These loan packages are bought by sealed
competitive bid. At date of purchase the Company has no guarantee it can
recover its investment or collect any of the principal balance. The
Company has adopted the practice of recovering its investment then
recognizing as income all proceeds of collection efforts in the period in
which the money is received.
The Company has acquired several loan packages from the Resolution
Trust Corp., and FDIC (see Note #8) and other privately negotiated
contracts. Because the financial instruments that the Company holds have
no established market through which the Company could liquidate them, the
amounts listed below represent the anticipated amounts to be realized over
a period of years.
F-9
</Page>
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #8 - Resolution Trust Contracts -Continued-
- ------------------------------------------------
Scheduled below are the disclosures required pursuant to SFAS 107.
Original
Purchase Book Values Expected Returns
Amount 02/28/97 02/29/96 02/29/97 02/28/96
-------------------------------------------------
Kansas City Loan Package $ 92,000 $ 8,500 $ 64,500 $ 14,000 $ 70,000
Panama City Trailer
Park Loan 100,000 39,000 81,000 69,000 111,000
Irvine, California Loan
Package 162,223 59,023 159,034 69,990 170,000
Connecticut Mortgage
Certificate 35,050 12,050 35,050 17,050 40,000
Connecticut SBA Loan 20,857 15,857 20,857 25,000 30,000
-------------------------------------------------
Subtotal $410,130 $134,430 $360,441 $195,040 $421,000
A.R. Eiger Enterprises 100,000 100,000 100,000 100,000 100,000
-------------------------------------------------
Total $310,130 $ 34,420 $260,441 $ 95,040 $321,000
=================================================
Further recoveries of the outstanding loans of the loan packages is
uncertain as to what amount or in what accounting period collection will be
made.
NOTE #9 - Related Party Transactions
- ------------------------------------
(A) Commissions
The Company has an agreement with its officers to pay a commission of up to
40% of the total collected on the Resolution Trust Corporation, and the F.D.I.C.
notes after it has recovered its initial investment. Commission using the same
criteria, of up to 40% may also be paid to other persons, as contracted by the
officers, for amounts collected. In the year ended February 28, 1997,
commissions of $60,000 were paid to the Company President. In the year ended
February 28, 1996, commission of $38,200 was paid to its President. In the year
ended February 28, 1995, commission of $35,000 was paid to its President.
(B) Office Facilities
The Company rents space and office incidentals (copy service, secretarial,
and miscellaneous) from the firm of one of its officers. Such space is on a
month to month basis, and may be terminated by either party, with one month
notice.
F-10
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #9 - Related Party Transactions -Continued-
- ------------------------------------------------
(C) Other Related Party Transactions
Stanley DeWaal, an officer and director of the Company, is the general
partner of Center Street Associates, Ltd, ("CSA"), a Utah limited partnership
which owns approximately 37.5 acres of the parcel of unimproved real property
which originally included the 5.58 acres of unimproved real property in which
the Company owns an 80% interest located in Pocatello, Idaho. CSA was one of
the parties, together with the Company and other unrelated parties, which
originally owned a percentage interest in the entire tract which was
reapportioned during the fiscal year ended February 28, 1993.
Eiger Enterprises, Ltd., has currently, and has from time to time, entered
into arrangements with the Company in connection with the purchase of loan
packages. However, the Company has no written contracts in connection with such
arrangements. Eiger Enterprises, Ltd., is a limited partnership the general
partner of which is Eiger, Inc., a Company controlled by Susan Wade. Mrs. Wade
and her husband, Bryce Wade, are deemed the beneficial owners of in excess of
five percent of the outstanding shares of the Company. During the fiscal years
ended February 29, 1996 and February 28, 1995, Eiger Enterprises, Ltd., invested
a total of $159,034 and $143,748 respectively, in such joint arrangements. In
the current fiscal year the Company sold to Eiger Enterprises, Ltd., its share
of Arizona property for a minimum of $100,000 represented by a note receivable
that was paid in full on October 4, 1997.
The Company provides to Mr. Wade a nominal amount of office space at no
charge; the Company has no written contracts for such arrangement
NOTE #10 - Concentration of Credit Risk
- ---------------------------------------
The Company maintains cash savings at several financial institution located
in Utah. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company has no uninsured savings.
NOTE #11 - Taxes
- ----------------
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
Expiration
Year of Loss Amount Date
-------------------------------------
1997 $39,836 2012
F-11
FIRST MORTGAGE CORPORATION
Notes to Financial Statements -Continued-
NOTE #11 - Taxes -Continued-
- ----------------------------
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issued that create timing differences that would mandate
deferred tax expense. Net operatins losses would create possible tax assets in
future years. Due to the uncertainty as to the utilization of net operating
loss carryforwards an evaluation allowance has been made to the extent of any
tax benefit that net operating losses may generate.
1997 1996 1995
--------------------------------
Current Tax Asset Value of Net Operating $ 39,836 $ -0- $ -0-
Loss Carryforwards at Current Prevailing
Federal Tax Rate 5,976 -0- -0-
Evaluation Allowance (5,976) -0- -0-
--------------------------------
Net Tax Asset $ -0- $ -0- $ -0-
Current Income Tax Expense -0- -0- -0-
Deferred Income Tax Benefit -0- -0- -0-
F-12