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: September 30, 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 October 31, 2001
FIRSTMARK CORP.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2001 and December 31, 2000............................3
Consolidated Statements of Operations
Nine Months and Three Months Ended
September 30, 2001 and 2000.........................................5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2000.......................6
Notes to Consolidated Financial Statements...............................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................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
September 30, 2001 December 31, 2000
------------------ -----------------
(Unaudited)
Cash and cash equivalents $4,194,546 $4,680,993
Receivables - other, net -- 7,173
Investments:
Marketable securities 22,128 35,134
Real estate and other investments 202,326 316,751
---------- ----------
Total investments 224,454 351,885
---------- ----------
Other assets:
Property, plant and equipment - net 5,548 7,106
Deferred tax asset - net of valuation allowance 19,290 19,290
Other assets 7,046 25,188
---------- ----------
Total other assets 31,884 51,584
---------- ----------
TOTAL ASSETS $4,450,884 $5,091,635
========== ==========
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FIRSTMARK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 2001 December 31, 2000
------------------ -----------------
(Unaudited)
LIABILITIES:
Accounts payable and other liabilities $ 58,516 $ 69,717
Deferred tax liability 19,290 19,290
----------- -----------
Total liabilities 77,806 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) (8,944,200) (8,798,918)
Treasury stock, at cost - 159,387 shares (589,513) (589,513)
Net accumulated comprehensive income (loss) -
net of taxes (23,461) (16,193)
----------- -----------
Total stockholders' equity 4,373,078 5,002,628
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,450,884 $ 5,091,635
=========== ===========
The accompanying notes are an integral part of these financial statements.
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FIRSTMARK CORP. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
================================================================================
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
REVENUES
Interest and dividends $ 144,204 $ 238,050 $ 35,680 $ 86,309
Investment gains, net 30,617 25,141 -- 44
----------- ----------- ----------- -----------
Total revenues 174,821 263,191 35,680 86,353
----------- ----------- ----------- -----------
EXPENSES
Write-offs of loans and investments 75,515 -- 5,997 --
General and administrative expenses 170,789 269,013 51,078 88,096
----------- ----------- ----------- -----------
Total expenses 246,304 269,013 57,075 88,096
----------- ----------- ----------- -----------
Loss before income taxes (71,483) (5,822) (21,395) (1,743)
INCOME TAX (BENEFIT) EXPENSE -- -- -- --
----------- ----------- ----------- -----------
NET LOSS (71,483) (5,822) (21,395) (1,743)
PREFERRED STOCK DIVIDEND 73,800 96,300 21,300 32,100
----------- ----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON SHARES (145,283) (102,122) (42,695) (33,843)
----------- ----------- ----------- -----------
Other comprehensive income (loss) - net of tax
Unrealized holding gains (losses) arising during period 193 (2,296) (3,904) (11,088)
Less: Reclassification adjustment for gains included
in net loss (7,461) -- -- --
=========== =========== =========== ===========
Other comprehensive income (loss) (7,268) (2,296) (3,904) (11,088)
=========== =========== =========== ===========
COMPREHENSIVE LOSS APPLICABLE TO COMMON SHARES $ (152,551) $ (104,418) $ (46,599) $ (44,931)
=========== =========== =========== ===========
Basic and diluted loss per common share:
Net loss per common share $ (0.03) $ (0.02) $ (0.01) $ (0.01)
=========== =========== =========== ===========
Comprehensive loss applicable to common shares $ (0.03) $ (0.02) $ (0.01) $ (0.01)
=========== =========== =========== ===========
Weighted - average number of shares outstanding 5,342,043 5,324,525 5,342,043 5,329,434
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
FIRSTMARK CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
================================================================================
Nine Months Ended
September 30,
-------------
2001 2000
---- ----
OPERATING ACTIVITIES
Net loss $ (71,483) $ (5,822)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities
Depreciation and amortization 1,558 1,557
Write-offs of loans and investments 75,515 --
Gain on sale of marketable securities (24,520) --
Gain on sale of venture capital investments -- (25,000)
Net (gain) loss on sale of real estate investments (6,097) 926
Other non-cash changes 3,743 3,507
Changes in assets and liabilities:
Decrease in:
Accounts receivable 7,173 179,303
Other assets 18,142 20,739
Decrease in:
Accounts payable and other liabilities (11,201) (49,919)
----------- -----------
Net cash provided by operating activities (7,170) 125,291
----------- -----------
Cash flows from Investing Activities
Increase in real estate investments (9,866) (9,808)
Proceeds from sale of marketable securities 26,515 --
Proceeds from sale of venture capital investments -- 75,000
Proceeds from sale of real estate investments 54,874 94,324
----------- -----------
Net cash provided by investing activities 71,523 159,516
----------- -----------
Cash flows from Financing Activities
Preferred stock dividends (73,800) (96,300)
Purchase of preferred stock (477,000) --
----------- -----------
Net cash used by financing activities (550,800) (96,300)
----------- -----------
Net change in cash and cash equivalents (486,447) 188,507
Cash and cash equivalents, beginning of period 4,680,993 4,541,344
----------- -----------
Cash and cash equivalents, end of period $ 4,194,546 $ 4,729,851
=========== ===========
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 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 nine months ended
September 30, 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
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. 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
Nine Months Ended September 30, 2001
Compared to the Nine Months Ended September 30, 2000
----------------------------------------------------
Interest and dividends revenue amounted to approximately $144,000 in
the nine months ended September 30, 2001 as compared to $238,000 in the
comparable period of the prior year. This decrease results from investment of
lesser amounts at lower rates during the current year period as compared to the
prior year period. Net investment gains relating to sales of marketable
securities, venture capital and real estate investments amounted to
approximately $31,000 and $25,000 for the nine months ended September 30, 2001
and 2000, respectively.
General and administrative expenses decreased by approximately $98,000
during the nine months ended September 30, 2001 compared to the comparable prior
year period. This decrease is primarily the result of lower legal ($68,000) and
accounting ($19,000) fees in the current year period. The Company recorded an
additional provision of approximately $76,000 in the current year to reduce the
carrying value of its investment in certain real estate to reflect current
market conditions. There were no write-offs of loans and investments in the
prior year period.
Three Months Ended September 30, 2001
Compared to the Three Months Ended September 30, 2000
-----------------------------------------------------
Interest and dividends revenue amounted to approximately $36,000 in the
current quarter compared to $86,000 in the comparable quarter of the prior year.
This decrease results from investment of lesser amounts at lower rates during
the current year quarter compared to the prior year quarter.
-8-
General and administrative expenses decreased by approximately $37,000
during the current quarter compared to the prior year quarter. This decrease is
primarily the result of lower legal fees ($29,000) in the current year period.
The Company recorded an additional provision of approximately $6,000 in the
current year period to reduce the carrying value of its investment in certain
real estate to reflect its net realizable value. There were no write-offs of
loans and investments in the prior year period.
Liquidity and Capital Resources
At September 30, 2001, the Company's cash and cash equivalents amounted
to approximately $4.2 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 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.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
FAS No. 141, "Business Combinations." FAS 141 requires the purchase method of
accounting for business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. In July 2001, the FASB issued FAS
No. 142, "Goodwill and Other Intangible Assets", which is effective January 1,
2002. FAS 142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. FAS 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption.
Management's assessment is that these Statements will not have a material effect
on the Company's financial position or results of operations.
In June 2001, the FASB issued FAS No. 143, "Accounting for Asset
Retirement Obligations." FAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. FAS 143 is effective for fiscal years
beginning after June 15, 2002. The Company is in the process of evaluating the
impact of implementing FAS 143.
-9-
In August 2001, the FASB issued FAS No. 144, "Accounting for the
Impairment of Long-Lived Assets" which supersedes FAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
and the accounting and reporting provisions of APB No. 30, "Reporting the
Results of Operations-Reporting and Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for the disposal of a segment of business. This Statement is
effective for fiscal years beginning after December 15, 2001. FAS No. 144
retains many of the provisions of FAS No. 121, but addresses certain
implementation issues associated with that Statement. The Company is currently
evaluating the impact of implementing FAS No. 142.
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.
-10-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
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
As previously reported in the Form 10-KSB, the Company filed
in March 2000 an application with the Securities and Exchange
Commission ("Commission") for an order exempting it from all
provisions of the Investment Company Act of 1940, as amended
(the "1940 Act"). The Commission issued an order granting the
Company's application on October 31, 2001. The order exempts
the Company from all provisions of the 1940 Act until the
earlier of one year from October 31, 2001 or the date that the
Company no longer may be deemed to be an investment company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(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: November 13, 2001 /s/ Donald V. Cruickshanks
-------------------------------------
Donald V. Cruickshanks
President and Chief Executive Officer
Date: November 13, 2001 /s/ Ronald C. Britt
-------------------------------------
Ronald C. Britt
Chief Financial Officer