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Deficient management leads INDITEX on the verge of fail BUCHAREST, ROMANIA - Zara wants to cover losses from theft with employees’ money. The management, theft and losses give headaches to the Spanish group INDITEX, the owner of the ZARA chain. Only 10 months before, on July 25th, 2011, the publication Ziarul Financiar announced the fact that “INDITEX takes the manager from the Douglas perfumeries” pointing at Paul Cuza, who previously had the function of General Manager for Parfumerie Douglas SRL. Currently, the Romanian INDITEX group performs salary and structural changes without precedent, which the management team from Bucharest doesn’t want to explain. The problem of the clothes theft is a known phenomenon, especially when it comes to expensive brands such as ZARA or Massimo Dutti. The phenomenon was publicly recognized even by the management of the INDITEX Group Romania, two years before. Probably worried by this fact, Mihai Cioltea, the development manager of the INDITEX Group from Romania, also named by the press as “the Zara man”, stated in 2010 for the economic website InCont the following: “They steal a lot. Only for the stores in Bucharest we have 10 cases of stealing per day, which we discover and, depending on the severity, we call the police”.[...] Read the rest of the article... |
We respect intellectual property rights and will take appropriate steps to protect these rights. Form 10-QSB for FIRST CHESAPEAKE FINANCIAL CORP filed on May 4, 2001
UNITED STATES
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
For the quarterly period ended March 31, 2001 Commission File Number 0-21912
First Chesapeake Financial Corporation
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 of 1934 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 [X] No [ ] The number of shares of common stock of registrant outstanding as of March 31, 2001 was 9,801,153 shares.
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The accompanying notes are an integral part of these statements.
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See accompanying notes to consolidated financial statements.
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See accompanying notes to consolidated financial statements.
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FIRST CHESAPEAKE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the years ended December 31, 1999 and December 31, 2000.
2. Acquisitions
On February 9, 1999, the Company acquired substantially all of the assets of Mortgage Concepts, Inc., an originator of primarily subprime and alternate documentation residential mortgage loans which now operates as the Company's Collateral One subsidiary. The purchase price was $4,100,000, subject to reduction if certain financial benchmarks, as outlined in the Asset Purchase Agreement, are not attained by the subsidiary. The $4,100,000 purchase price consisted of a combination of $3,612,500 cash and $487,500 Company common stock, payable over a multi-year period of time specified in the Agreement. The acquisition has been accounted for under the purchase method of accounting. As of October 9, 1999, the Company restructured the remaining amounts due the sellers of the assets of Mortgage Concepts, Inc. which now operates as the Company's Collateral One subsidiary. The purchase price of $4,100,000 was unchanged, and was amended to consist of $2,862,500 of cash and $1,237,500 of Company common stock, payable over the same multi-year period of time. As of August 31, 2000, the Company implemented a purchase price adjustment and restructured the remaining amounts due the sellers of the assets of Mortgage Concepts, Inc. The purchase price of $4,100,000 was reduced to $2,804,000 in accordance with the Asset Purchase Agreement, and was amended to consist of $2,400,000 of cash and $404,000 of Company common stock. At September 30, 2000, the Company had paid the sellers $2,278,000 of cash, with the remaining $122,000 of cash payments due in ten equal installments through August 2001. All stock due the sellers had been issued as of August 31, 2000. Effective March 31, 2001, the Company acquired 100% of the stock of Family First Mortgage, Inc., a Fort Lauderdale, FL originator of residential mortgage loans. The purchase price was $250,000 payable in common stock of the Company, plus the issuance into escrow of an additional 500,000 shares of Company common stock to be released after one year, subject to attaining certain financial benchmarks as outlined in the agreement. The acquisition has been accounted for under the purchase method of accounting.
3. Debt and Equity Financing
In 1998, the Company issued $635,000 of convertible subordinated debentures. Up to 20% of the subordinated debenture notes are convertible, at any time at option of the holder, into the Company's common stock at a price of $2.00 per share. The $635,000 includes $350,000 of subordinated debentures issued to certain officers of the Company in exchange for a similar reduction in amounts due to officers. In November 1999, the Company offered to convert the convertible subordinated debentures into Company common stock at a conversion price of $1.50 per share. Holders of $560,000 of debentures elected to convert their holdings into 373,333 shares of common stock, including all debentures held by officers of the Company. At March 31, 2001, the remaining $75,000 of convertible subordinated debentures remain outstanding under the original terms and conditions of the issuance. In December 2000, the Company authorized a private placement of a minimum of $250,000 and a maximum of $1,500,000 of the Company's Series B Convertible Preferred Stock, no par value (the "Preferred Stock") at $1.00 per share. The Convertible Preferred Stock bears interest at 12-1/2% payable quarterly, and is convertible into common stock of the Company at a conversion price equal to the average bid price of the common stock for the trailing thirty days prior to date of written notice to convert. At March 31, 2001, the Company had received subscriptions totaling $928,000, including $75,000 of Preferred Stock issued to an officer of the Company in exchange for conversion of $75,000 of debt into common stock, and anticipates placement of the remaining authorized amount during 2001.
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In February 1999, the Company borrowed $1,500,000 from a bank; $1,200,000 of such borrowings was used in conjunction with the Mortgage Concepts, Inc. acquisition. The loan, guaranteed by certain officers of the Company and other individuals, bears interest at prime plus 2% and matures in November 2000. In November 1999, the Company borrowed an additional $607,000 from the bank, secured by the personal guaranty and collateral of the Chairman of the Board of Directors of the Company to partially finance a payment due the sellers of Mortgage Concepts, Inc. and for working capital needs. This loan also bears interest at prime plus 2% and matures in November 2000. In connection with both these financings, the Company entered into loan guaranty agreements with the individuals guaranteeing the loans, whereby such individuals received shares and/or options of the Company's common stock as compensation for their guarantees. In February 2001, the Bank loan was restructured to reduce the principal balance by approximately $800,000 by June 15, 2001and approximately $25,000 per month thereafter. At March 31, 2001, the balance of the loan was reduced to $1,603,000 and is scheduled to further amortize to approximately $1,375,000 by June 30, 2001. The Company has warehouse lines of credit with maximum borrowings of $2,000,000 at March 31, 2001. At March 31, 2001 and December 31, 2000, $126,000 and $349,000 was outstanding under the lines, respectively.
4. Cessation of Florida Operations
In January 2000, the Company ceased operations of its FC Funding wholesale mortgage banking subsidiary and closed its two Florida locations, effective January 31, 2000.
5. Divestiture of Subsidiaries
In December 2000, the Company sold substantially all of the assets of NAI to an unrelated third party. The sale price was $195,000, subject to adjustment if certain financial benchmarks as outlined in the Agreement are not attained. The price was paid in cash in two payments which were delivered to the Company on December 4, 2000 and January 31, 2001 (see Item 6. Exhibits and Reports on Form 8-K herein). On January 1, 1999, the Company sold its investment in Premiere Chemical to a family member of one of its officers in exchange for purchaser's assumption of substantially all of Premiere Chemical's net liabilities; the transaction resulted in a gain of $38,441 during the first quarter of 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations Financial Condition Assets of the Company increased from $3,039,000 at December 31, 2000 to $3,510,000 at March 31, 2001, an increase of $471,000. This increase was primarily due to a $161,000 increase in cash and a $594,000 increase in goodwill arising from the Family First acquisition, partially offset by a $220,000 reduction in mortgage loans held for resale. Liabilities decreased from $3,971,000 at December 31, 2000 to $3,030,000 at March 31, 2001 primarily as a result of repayment of $504,000 under the note payable - bank and reduction in the warehouse note payable - bank of $223,000. Stockholders' equity increased by $1,412,000 from negative $931,000 at December 31, 2000 to $480,000 at March 31, 2001, resulting from the sale of $938,000 of Preferred Stock and the issuance of $507,000 of common stock under the Family First acquisition (as more fully described in Notes 3 and 2 above, respectively) partially offset by the loss of $24,000 for the period. At March 31, 2001, the Company had liquid assets of $508,000 and current liabilities of $2,393,000, including the bank loan of $1,603,000 as more fully described in Note 3 above and remaining payments due the sellers of Mortgage Concepts, Inc. of $49,000 due in 2001.
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Results of Operations Current Year Performance and Earnings Outlook The Company incurred a loss of $24,000 for the three months ended March 31, 2001 as compared to a loss of $260,000 for the same period in 2000. This sharp reduction in the amount of loss is a result of continued profitability of the Company's Collateral One operation and elimination of losses at the FC Funding operation, which was closed in the first quarter of 2000. Revenues increased by $231,000 year-to-year, and operating expenses were essentially unchanged between periods, and higher employee costs associated with the Collateral One growth were offset by reductions in other operating expenses and lower depreciation and amortization expense. As discussed more fully in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000, the Company is implementing its strategic plan of developing a retail and wholesale mortgage banking operation through acquisition and internal growth as a step toward developing a vertically integrated financial services company that can provide mortgage origination, homeowner's insurance, title insurance and home warranties, among other financial services, consumer direct, wholesale and through the Internet. However, there are no assurances that the Company will be able to successfully implement all aspects of its strategic plan. Liquidity and Capital Resources The Company's primary liquidity requirements have been the establishment, funding and expansion of its mortgage banking operations, including the February 1999 acquisition of the Collateral One operation and subsequent internal growth. The Company borrowed $2,107,000 from a bank in 1999 secured by the personal guarantees of several officers and directors of the Company and one outside investor to partially finance the Collateral One acquisition and for working capital needs (see Note 3 of the financial statements). The Company is seeking additional capital infusion to fund its operations and expansion and has obtained additional equity capital of $928,000 in the first quarter of 2001. While the Company believes it can attract the necessary capital to provide the liquidity necessary to pursue new business opportunities, no assurance can be given that it will in fact be able to do so. The Company funds its mortgage banking activities in large part through warehouse lines of credit, and its ability to continue to originate and wholesale residential mortgages is dependent upon continued access to capital on acceptable terms. Borrowings under these lines are repaid with the proceeds received by the Company from the sale of the loans to institutional investors. The Company's committed warehouse lines at March 31, 2001 allowed the Company to borrow up to $2 million. The warehouse lines expire within the next twelve months, but are generally renewable, however, no assurances are given that the Company can renew its warehouse lines or that such renewals can be made on equal or more favorable terms to the Company. The Company sells its originated and purchased loans, including all servicing rights, for cash to institutional investors, usually on a non-recourse basis, with proceeds applied to reduce corresponding warehouse line outstandings. Cash and cash equivalents at March 31, 2001 amounted to $235,000 as compared to $74,000 at December 31, 2000, or an increase of $161,000. During the first three months of 2001, the Company's operating activities utilized $69,000 as compared to utilizing $48,000 in the same period in 2000. The cash utilized by operating activities in the first three months of 2001 resulted from decreases in accounts payable and liabilities of discontinued subsidiaries, as the Company's $24,000 net loss for the period was more than offset by adjustment for non-cash expenses of depreciation and amortization. The cash utilized by operating activities in the same period of 2000 resulted from the Company's net loss for the period partially offset by increases in accruals and $108,000 of depreciation/amortization for the period. Investing activities utilized $94,000 for the Family First acquisition, and were negligible in the first three months of 2000. Financing activities provided $324,000 of capital in the first three months of 2001 through the sale of $853,000 of convertible preferred stock during the period partially offset by reduction in the bank loan of $504,000 and
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reduction in other notes payable of $36,000. During the comparable period of 2000, financing activities provided $173,000 of capital in the first three months of 2000 primarily through the sale of $175,000 of common stock. As of March 31, 2001, the Company had cash and cash equivalents of $235,000. The Company is seeking additional capital infusion to fund its operations, reduce its bank debt, and implement its expansion plans. While the Company believes it can attract the necessary capital to provide the liquidity necessary to pursue new business opportunities, no assurance can be given that it will in fact be able to do so. PART II - OTHER INFORMATION Item 1. Legal Proceedings Periodically, the Company and its subsidiaries become parties to legal proceedings incidental to its business. In the opinion of management, such matters are not expected to have a material impact on the financial position of the Company. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K In a report on Form 8-K dated March 31, 2001 the Company announced that on January 31, 2001, National Archives, Inc., a 60% subsidiary of the Company, completed the sale of essentially all of its assets to Iron Mountain Records Management, Inc. under an Asset Purchase and Sale Agreement dated as of December 1, 2000. Assets consist primarily of accounts receivable, long term contracts with customers, certain computer hardware and software, customer deposits and non-competition agreements. Cash on hand and certain fixed assets consisting of shelving and racking for inventory were excluded from the transaction. In addition, National Archives, Inc. and Mark Mendelson, an officer and director of the Company, each entered in Noncompetition and Confidentiality Agreements with the Purchaser. The sale price was $195,000, subject to adjustment if certain financial benchmarks as outlined in the Agreement are not attained. The price was paid in cash in two payments which were delivered to the Company on December 4, 2000 and January 31, 2001. Effective December 1, 2000, the Purchaser entered into a seven month lease agreement for National Archives' Philadelphia, PA warehouse premises with Oregon Avenue Associates, Inc., a company wholly-owned by Mark Mendelson, an officer and Director of the Company. In a report on Form 8-K dated April 26, 2001 the Company announced a change in accountant from Grant Thornton LLP to Gross Kreger Passio LLP as of that date. The reports of Grant Thornton LLP on the financial statements for the fiscal years ended December 31, 1998 and 1999 contained no adverse opinion or disclaimer of opinion and were not qualified or modifies as to uncertainty, audit scope or accounting principal, except that their report for each fiscal year contained an explanatory paragraph regarding the substantial doubt about the Company's ability to continue as a going concern. The Company's Audit Committee recommended and approved the decision to change independent accountants. In connection with its audits for the two most recent fiscal years
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and through April 23, 2001, there have been no disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused them to make reference thereto in their report on the financial statements for such years. Grant Thornton LLP has furnished a letter addressed to the Securities and Exchange Commission stating that it agrees with the above statements. FIRST CHESAPEAKE FINANCIAL CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.
FIRST CHESAPEAKE FINANCIAL CORPORATION
Registrant
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