SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2000
Commission File Number: 0-20806
FIRSTMARK CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
Maine 01-0389195
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
P.O. Box 1398
Richmond, Virginia 23218
(Address of Principal Executive Offices)
(804) 648-9048
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X__ No _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
5,322,043 shares of common stock, par value $0.20 per share,
outstanding as of June 30, 2000
FIRSTMARK CORP.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999...............................................3
Condensed Consolidated Statements of Operations
Six Months and Three Months Ended
June 30, 2000 and 1999............................................................5
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999...........................................6
Notes to Condensed Consolidated Financial Statements.......................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation..........................................................8
Part II. Other Information
Item 1. Legal Proceedings.........................................................................11
Item 2. Changes in Securities and Use of Proceeds.................................................11
Item 3. Defaults Upon Senior Securities...........................................................11
Item 4. Submission of Matters to a Vote of Security Holders.......................................11
Item 5. Other Information.........................................................................11
Item 6. Exhibits and Reports on Form 8-K..........................................................11
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FIRSTMARK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
- -----------------------------------------------------------------------------------------------------
ASSETS
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
Cash and cash equivalents $4,744,008 $4,541,344
Receivables 7,095 186,398
Investments:
Marketable securities 97,576 72,828
Venture capital investments - net 15,000 65,000
Real estate and other investments 330,241 418,433
---------- ----------
Total investments 442,817 556,261
---------- ----------
Other assets:
Property, plant and equipment - net 8,145 9,183
Deferred tax asset - net of valuation allowance -- 19,428
Other assets 3,750 20,739
---------- ----------
Total other assets 11,895 49,350
---------- ----------
TOTAL ASSETS $5,205,815 $5,333,353
========== ==========
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FIRSTMARK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
LIABILITIES:
Accounts payable and other liabilities $ 35,099 $ 88,252
Deferred tax liability 4,530 19,428
------------ ------------
Total liabilities 39,629 107,680
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $0.20 par value -
authorized 250,000 shares; issued 53,500 shares
(liquidation preference $2,140,000) 10,700 10,700
Common stock, $0.20 par value - authorized
30,000,000 shares; issued 5,501,430 shares 1,100,286 1,100,286
Additional paid-in capital - preferred 2,023,589 2,023,589
Additional paid-in capital - common 11,358,400 11,358,400
Retained earnings (deficit) (8,638,243) (8,569,964)
Treasury stock, at cost - 179,387 shares (663,486) (663,486)
Net accumulated comprehensive income (loss) -
net of taxes (25,060) (33,852)
------------ ------------
Total stockholders' equity 5,166,186 5,225,673
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,205,815 $ 5,333,353
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
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FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES
Interest and dividends $ 151,741 $ 76,290 $ 69,802 $ 58,723
Investment gains, net 25,097 -- 1,145 --
----------- ----------- ----------- -----------
Total revenues 176,838 76,290 70,947 58,723
----------- ----------- ----------- -----------
EXPENSES
Employee compensation and benefits -- 18,600 -- --
Write-offs of loans and investments -- 202,000 -- 202,000
General and administrative expenses 180,917 546,526 90,992 430,533
Interest expense -- 8,995 -- --
----------- ----------- ----------- -----------
Total expenses 180,917 776,121 90,992 632,533
----------- ----------- ----------- -----------
Loss from continuing operations before income taxes (4,079) (699,831) (20,045) (573,810)
INCOME TAX (BENEFIT) EXPENSE -- -- -- --
----------- ----------- ----------- -----------
Net loss from continuing operations (4,079) (699,831) (20,045) (573,810)
DISCONTINUED OPERATIONS
Income from discontinued operations - net of tax -- 80,596 -- --
Loss from disposal of discontinued operations - net of
tax -- (5,118) -- --
----------- ----------- ----------- -----------
NET LOSS (4,079) (624,353) (20,045) (573,810)
----------- ----------- ----------- -----------
PREFERRED STOCK DIVIDEND 64,200 68,400 32,100 34,200
----------- ----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON SHARES (68,279) (692,753) (52,145) (608,010)
----------- ----------- ----------- -----------
Other comprehensive income (loss) - net of tax
Unrealized holding gains (losses) arising during period (42,572) (67,938) (32,820) (19,924)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (110,851) $ (760,691) $ (84,965) $ (627,934)
=========== =========== =========== ===========
Basic and diluted earnings (loss) per common share:
Income (loss) from continuing operations $ (0.01) $ (0.14) $ (0.01) $ (0.11)
Discontinued Operations 0.00 0.01 0.00 0.00
----------- ----------- ----------- -----------
$ (0.01) $ (0.13) $ (0.01) $ (0.11)
=========== =========== =========== ===========
Comprehensive income (loss) applicable to common shares $ (0.02) $ (0.14) $ (0.02) $ (0.12)
=========== =========== =========== ===========
Weighted - average number of shares outstanding 5,322,043 5,319,876 5,322,043 5,319,876
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
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FIRSTMARK CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
2000 1999
---- ----
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net loss from continuing operations $ (4,079) $ (699,831)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities
Depreciation and amortization 1,038 1,038
Write-offs of loans and investments -- 202,000
Gain on sale of venture capital investments (25,000) --
Net loss on sale of real estate investments 926 --
Other non-cash changes (11,426) 12,032
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 179,303 (26,017)
Prepaid expenses and other current assets 16,989 11,603
Increase (decrease) in:
Accounts payable and other liabilities (53,153) 136,729
Accounts payable to related party -- (114,712)
----------- -----------
Net cash provided (used) by operating activities 104,598 (477,158)
----------- -----------
Cash flows from Investing Activities
(Increase) in real estate investments (7,058) (4,848)
Proceeds from sale of venture capital investments 75,000 --
Proceeds from sale of real estate investments 94,324 --
----------- -----------
Net cash provided (used) by investing activities 162,266 (4,848)
----------- -----------
Cash flows from Financing Activities
Preferred stock dividends (64,200) (68,400)
Proceeds from borrowings -- 115,000
Repayments of borrowed funds -- (680,000)
----------- -----------
Net cash used by financing activities (64,200) (633,400)
----------- -----------
Cash Provided (Used) by Continuing Operations 202,664 (1,115,406)
----------- -----------
Discontinued Operations:
Proceeds from sale of discontinued operations,
net of transaction costs paid -- 6,242,738
Other -- 22,001
----------- -----------
Cash Provided by Discontinued Operations -- 6,264,739
----------- -----------
Net change in cash and cash equivalents 202,664 5,149,333
Cash and cash equivalents, beginning of period 4,541,344 53,575
----------- -----------
Cash and cash equivalents, end of period $ 4,744,008 $ 5,202,908
=========== ===========
Cash payments for interest $ -- $ 8,995
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
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FIRSTMARK CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
1. The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the year ended December 31, 1999 of Firstmark Corp. (the
"Company"), as amended, as filed with the Securities and Exchange
Commission. The December 31, 1999 balance sheet was derived from the
audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the six months ended June 30,
2000 are not necessarily indicative of the results to be expected for the
full year.
3. Earnings (Loss) Per Common Share
Basic EPS is computed by dividing net income, less required dividends on
redeemable preferred stock, by the weighted average number of common
shares outstanding during the year. Diluted EPS is computed using the
weighted average number of common shares outstanding during the year,
including the dilutive effect of all potential common shares.
4. Reclassifications
Certain reclassifications have been made in the accompanying statements to
permit comparison.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Firstmark Corp. (the "Company") was incorporated in Maine on October
28, 1982. Until March 5, 1999, the Company was principally engaged in the
business of issuing title insurance through a subsidiary, Southern Title
Insurance Corporation ("STIC"). Until January 24, 1997, the Company also
actively traded public stocks and bonds and provided financial consulting
services to a select number of individuals and institutions.
On March 5, 1999, the Company sold Investors Southern Corporation
("ISC") and its subsidiaries, including STIC, to Old Guard Group, Inc. ("Old
Guard") for $6.75 million in cash and a three year earn-out in cash based on the
pre-tax net income of ISC and its subsidiaries, including STIC, for each of the
fiscal years ending December 31, 1999, 2000 and 2001. Generally accepted
accounting principles ("GAAP") required that the Company reflect the effects of
the transaction as of December 31, 1998, including the loss on disposal, and
segregate continuing operations from discontinued operations. A complete
discussion of the Company's business is contained in Item 1, Description of
Business, of Amendment No. 1 to the Company's Annual Report on Form 10-KSB (the
"Form 10-KSB"), filed with the Securities and Exchange Commission on April 6,
2000.
The following discussion provides information about the major
components of the results of operations and financial condition, liquidity and
capital resources of the Company. This discussion and analysis should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes to
Condensed Consolidated Financial Statements.
Results of Operations
Six Months Ended June 30, 2000
Compared to the Six Months Ended June 30, 1999
----------------------------------------------
Continuing Operations
- ---------------------
Interest and dividends revenue amounted to approximately $152,000 in
the six months ended June 30, 2000 as compared to $76,000 in the comparable
period of the prior year. This increase results from investment of the net
proceeds from the sale of the title insurance operations for the entire current
year period as compared to approximately four months in the prior year period.
Net investment gains relating to sales of venture capital and real estate
investments amounted to $25,000 for the six months ended June 30, 2000 (none for
the prior year period).
Operating expenses and general and administrative expenses decreased by
approximately $393,000 during the six months ended June 30, 2000 compared to the
comparable prior year period. This decrease is primarily the result of a
provision ($232,000) in the prior year period for
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the estimated loss from certain claims settled through mediation and lower legal
($82,000) and accounting fees ($36,000) in the current year period. There were
no write-offs of loans and investments in the current year period, whereas
$202,000 was written off in the six months ended June 30, 1999.
Discontinued Operations
- -----------------------
As previously disclosed, the title insurance operations were sold as of
March 5, 1999. Accordingly, the condensed consolidated statement of operations
included in this report includes operating results for the title insurance
operations through that date in the prior year period while no title insurance
operations are included in the current year period.
Three Months Ended June 30, 2000
Compared to the Three Months Ended June 30, 1999
------------------------------------------------
Continuing Operations
- ---------------------
Interest and dividends revenue amounted to approximately $70,000 in the
current quarter compared to $59,000 in the comparable quarter of the prior year.
This increase results from somewhat higher interest rates on invested assets
during the current year quarter compared to the prior year quarter. Net
investment gains relating to sales of real estate investments amounted to
approximately $1,000 for the quarter ended June 30, 2000 (none for the prior
year quarter).
Operating expenses and general and administrative expenses decreased by
approximately $340,000 during the current quarter compared to the prior year
quarter. This decrease is primarily the result of a provision ($232,000) in the
prior year period for the estimated loss from certain claims settled through
mediation and lower legal ($85,000) and accounting fees ($16,000) in the current
year period. There were no write-offs of loans and investments in the current
year period, whereas $202,000 was written off in the three months ended June 30,
1999.
Discontinued Operations
- -----------------------
As previously disclosed, the title insurance operations were sold as of
March 5, 1999. Accordingly, the condensed consolidated statement of operations
included in this report includes no title insurance operations in the current or
prior year quarter.
Liquidity and Capital Resources
At June 30, 2000, the Company's cash and cash equivalents amounted to
approximately $4.7 million, which is expected to exceed its obligations as they
become due.
Year 2000 Issues
Year 2000 issues relate primarily to the inability of certain
computerized devices (hardware, software and equipment) to process year-dates
properly after 1999. Many existing computer programs have been written using
only two digits to define an applicable year rather
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than four digits. Accordingly, on January 1, 2000, many date-sensitive programs
and devices may have recognized a date using the two digits "00" as the year
1900 rather than the year 2000. This situation could have resulted in inaccurate
processing of data, erroneous results or other system failures.
As a result of the identification and assessment of the Company's Year
2000 issues and the subsequent implementation of procedures to address any
potential problem areas, the Company is not aware of any problems that it has
experienced in processing transactions to date in the year 2000.
Recent Accounting Pronouncements
Reference is made to the disclosures included under the heading "Recent
Accounting Pronouncements" in Item 6, Management's Discussion and Analysis of
Financial Condition and Results of Operations, of the Form 10-KSB.
Forward-Looking Statements
Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Although the Company believes that its expectations with respect to
certain forward-looking statements are based upon reasonable assumptions within
the bounds of its business and operations, there can be no assurance that actual
results, performance or achievements of the Company will not differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the disclosures in Item 3, Legal Proceedings,
of the Form 10-KSB for a description of the Company's pending legal
proceedings. There have been no additional material developments
with respect to these proceedings.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended June 30, 2000.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRSTMARK CORP.
Date: August 14, 2000 /s/ Donald V. Cruickshanks
-------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
Date: August 14, 2000 /s/ Ronald C. Britt
-------------------------------------
Ronald C. Britt
Chief Financial Officer