SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2001 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: 5,342,043 shares of common stock, par value $0.20 per share, outstanding as of May 17, 2001 FIRSTMARK CORP. TABLE OF CONTENTS Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets March 31, 2001 (Unaudited) and December 31, 2000.......................3 Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2001 and 2000.............................5 Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2001 and 2000.............................6 Notes to Consolidated Financial Statements (Unaudited)........................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation...............................................8 Part II. Other Information Item 1. Legal Proceedings............................................................10 Item 2. Changes in Securities and Use of Proceeds....................................10 Item 3. Defaults Upon Senior Securities..............................................10 Item 4. Submission of Matters to a Vote of Security Holders..........................10 Item 5. Other Information............................................................10 Item 6. Exhibits and Reports on Form 8-K.............................................10 -2- PART I -- FINANCIAL INFORMATION Item 1. Financial Statements FIRSTMARK CORP. AND SUBSIDIARIES Consolidated Balance Sheets ================================================================================ ASSETS March 31, 2001 December 31, 2000 -------------- ----------------- (Unaudited) Cash and cash equivalents $4,276,264 $4,680,993 Receivables - other, net -- 7,173 Investments: Marketable securities 25,719 35,134 Real estate and other investments 270,724 316,751 ---------- ---------- Total investments 296,443 351,885 ---------- ---------- Other assets: Property, plant and equipment - net 6,587 7,106 Deferred tax asset - net of valuation allowance 19,290 19,290 Other assets 14,629 25,188 ---------- ---------- Total other assets 40,506 51,584 ---------- ---------- TOTAL ASSETS $4,613,213 $5,091,635 ========== ========== -3- FIRSTMARK CORP. AND SUBSIDIARIES Consolidated Balance Sheets ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 2001 December 31, 2000 -------------- ----------------- (Unaudited) LIABILITIES: Accounts payable and other liabilities $ 71,407 $ 69,717 Deferred tax liability 19,290 19,290 ------------ ------------ Total liabilities 90,697 89,007 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred stock, Series A, $0.20 par value - authorized 250,000 shares; issued: 2001 - 35,500 shares, 2000 - 52,500 shares (liquidation preference: 2001 - $1,420,000 2000 - $2,100,000) 7,100 10,500 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 1,524,689 1,998,289 Additional paid-in capital - common 11,298,177 11,298,177 Retained earnings (deficit) (8,797,132) (8,798,918) Treasury stock, at cost - 159,387 shares (589,513) (589,513) Net accumulated comprehensive income - net of taxes (21,091) (16,193) ------------ ------------ Total stockholders' equity 4,522,516 5,002,628 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,613,213 $ 5,091,635 ============ ============ The accompanying notes are an integral part of these financial statements. -4- FIRSTMARK CORP. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) ================================================================================ Three Months Ended March 31, --------- 2001 2000 ---- ---- REVENUES: Interest and dividends $ 63,031 $ 81,939 Investment gains, net 24,520 23,951 ----------- ----------- Total revenues 87,551 105,890 ----------- ----------- EXPENSES: General and administrative expenses 54,566 89,925 ----------- ----------- Income before income taxes 32,985 15,965 INCOME TAX (BENEFIT) EXPENSE -- -- ----------- ----------- NET INCOME 32,985 15,965 ----------- ----------- PREFERRED STOCK DIVIDEND 31,200 32,100 ----------- ----------- NET INCOME (LOSS) APPLICABLE TO COMMON SHARES 1,785 (16,135) ----------- ----------- Other comprehensive income (loss) - net of tax Unrealized holding gains arising during period 2,563 41,612 Less: Reclassification adjustment for gains included in net income (7,461) -- ----------- ----------- Other comprehensive income (loss) (4,898) 41,612 ----------- ----------- COMPREHENSIVE INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (3,113) $ 25,477 =========== =========== Basic and diluted earnings (loss) per common share: Net income (loss) per common share $ 0.00 $ 0.00 =========== =========== Comprehensive income (loss) applicable to common shares $ 0.00 $ 0.00 =========== =========== Weighted - average number of shares outstanding 5,342,043 5,322,043 =========== =========== The accompanying notes are an integral part of these financial statements. -5- FIRSTMARK CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) ================================================================================ Three Months Ended March 31, --------- 2001 2000 ---- ---- OPERATING ACTIVITIES Net income $ 32,985 $ 15,965 Adjustments to reconcile net income to net cash provided (used) by operating activities Depreciation and amortization 519 519 Gain on sale of marketable securities (24,520) -- Gain on sale of venture capital investments -- (25,000) Net loss on sale of real estate investments -- 2,072 Other non-cash changes 2,523 (11,424) Changes in assets and liabilities: Decrease in: Accounts receivable 7,173 11,619 Prepaid expenses and other current assets 10,559 9,489 Increase (decrease) in: Accounts payable and other liabilities 1,690 (44,232) ----------- ----------- Net cash provided (used) by operating activities 30,929 (40,992) ----------- ----------- Cash flows from Investing Activities Increase in real estate investments (2,750) (4,308) Proceeds from sale of marketable securities 26,515 -- Proceeds from sale of venture capital investments -- 75,000 Proceeds from sale of real estate investments 48,777 38,228 ----------- ----------- Net cash provided by investing activities 72,542 108,920 ----------- ----------- Cash flows from Financing Activities Preferred stock dividends (31,200) (32,100) Purchase of preferred stock (477,000) -- ----------- ----------- Net cash used by financing activities (508,200) (32,100) ----------- ----------- Net change in cash and cash equivalents (404,729) 35,828 Cash and cash equivalents, beginning of period 4,680,993 4,541,344 ----------- ----------- Cash and cash equivalents, end of period $ 4,276,264 $ 4,577,172 =========== =========== The accompanying notes are an integral part of these financial statements. -6- FIRSTMARK CORP. AND SUBSIDIARIES Notes to 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, 2000 of Firstmark Corp. (the "Company"), as filed with the Securities and Exchange Commission (the "Commission"). The December 31, 2000 balance sheet was derived from the audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the three months ended March 31, 2001 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. -7- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. A complete discussion of the Company's business is contained in Item 1, Description of Business, of the Company's Annual Report on Form 10-KSB (the "Form 10-KSB"), filed with the Securities and Exchange Commission on April 5, 2001. Results of Operations Three Months ended March 31, 2001 compared to the Three Months ended March 31, 2000 ------------------------------------------------- Interest and dividends revenue amounted to approximately $63,000 in the current quarter compared to $82,000 in the comparable quarter of the prior year. This decrease results from a lower amount invested at a lower rate in the current year quarter as compared to the prior year quarter. Net investment gains relating to the sale of marketable securities amounted to approximately $25,000 in the quarter ended March 31, 2001. Net investment gains relating to sales of venture capital and real estate investments amounted to approximately $24,000 in the prior year quarter. General and administrative expenses decreased by approximately $35,000 during the current quarter compared to the prior year quarter. This decrease is primarily the result of lower accounting, legal and other fees. Liquidity and Capital Resources At March 31, 2001, the Company's cash and cash equivalents amounted to approximately $4.3 million, which is expected to exceed its obligations as they become due. During the first quarter of 2001, the Company redeemed 17,000 shares of its Series A preferred stock. Recent Accounting Pronouncements Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," is effective for all fiscal years beginning after June 15, 2000. FAS No. 133, as amended, establishes accounting and reporting standards for -8- derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under FAS No. 133, certain contracts that were not formerly considered derivatives may now meet the definition of derivative. The Company adopted FAS No. 133 effective January 1, 2001. The adoption of FAS No. 133 did not have a significant impact on the financial position, results of operation or cash flows of the Company. 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. -9- PART II - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to the disclosures in Item 3, Legal Proceedings, of the Form 10-KSB for a description of the Company's pending legal proceedings. There have been no additional material developments with respect to these proceedings. Item 2. Changes in Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K On February 13, 2001, the Company filed a Form 8-K with the Commission to report the resignation of George H. Morison and Steven P. Settlage from its Board of Directors and the appointment of Arch Aplin, III and Robert J. Ellis to its Board of Directors. The change was in connection with the purchase by Mr. Aplin of Company common stock owned by Messrs. Morison and Settlage and Donald V. Cruickshanks, the Company's President and Chief Executive Officer. -10- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRSTMARK CORP. Date: May 18, 2001 /s/ Donald V. Cruickshanks -------------------------------------- Donald V. Cruickshanks President and Chief Executive Officer Date: May 18, 2001 /s/ Ronald C. Britt -------------------------------------- Ronald C. Britt Chief Financial Officer