-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VC4tmgX+3d2CCz0ntmOKcrVQdYzpqlMygRyGJ+sTyzCTxyNrhPSqTO7YXg7s94i4 EAPTh2MP3TLSaWhUdw5Niw== 0000351903-06-000004.txt : 20060214 0000351903-06-000004.hdr.sgml : 20060214 20060214164823 ACCESSION NUMBER: 0000351903-06-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060214 DATE AS OF CHANGE: 20060214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EPOCH HOLDING CORP CENTRAL INDEX KEY: 0000351903 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 201938886 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09728 FILM NUMBER: 06616331 BUSINESS ADDRESS: STREET 1: 640 FIFTH AVENUE STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-303-7200 MAIL ADDRESS: STREET 1: 640 FIFTH AVENUE STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: J NET ENTERPRISES INC DATE OF NAME CHANGE: 20010123 FORMER COMPANY: FORMER CONFORMED NAME: JACKPOT ENTERPRISES INC DATE OF NAME CHANGE: 19920703 10-Q 1 december0510q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to___________________ Commission file no. 1-9728 EPOCH HOLDING CORPORATION __________________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 20-1938886 _______________________________ ____________________________________ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 640 Fifth Avenue, 18th Floor, New York, NY 10019 __________________________________________ __________ (Address of principal executive offices) (Zip Code) 212-303-7200 ____________________________________________________ (Registrant's telephone number, including area code) 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 ___ ___ Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes No x ___ ___ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes No x ___ ___ There were 18,878,164 shares of the Registrant's common stock outstanding as of February 10, 2006. EPOCH HOLDING CORPORATION AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets (Unaudited) - December 31, 2005 and June 30, 2005 Condensed Consolidated Statements of Operations (Unaudited) - Three and Six Months Ended December 31, 2005 and 2004 Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - Six Months Ended December 31, 2005 Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended December 31, 2005 and 2004 Notes to Condensed Consolidated Financial Statements - (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) December 31, June 30, 2005 2005 ____________ ________ ASSETS ______ Current assets: Cash and cash equivalents $ 7,631 $ 8,550 Accounts receivable 1,970 1,224 Prepaid expenses 174 66 ________ _______ Total current assets 9,775 9,840 ________ _______ Investments in technology-related businesses 157 157 Property and equipment, net of accumulated depreciation 2,081 2,088 Security deposits 726 946 ________ _______ Total assets $ 12,739 $13,031 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY ____________________________________ Current liabilities: Accounts payable and other current liabilities $ 3,079 $ 2,262 ________ _______ Total current liabilities 3,079 2,262 ________ _______ Deferred rent 1,079 981 Security deposits held 211 211 Commitments and contingencies (Note 5) Stockholders' equity: Preferred stock - authorized 1,000,000 shares of $1 par value; none issued - - Common stock - authorized 60,000,000 shares of $.01 par value; 18,721,178 and 18,257,749 shares issued, respectively 187 182 Additional paid-in capital 26,600 24,404 Unearned stock compensation (7,429) (7,480) Accumulated deficit (10,988) (7,529) ________ _______ Total stockholders' equity 8,370 9,577 ________ _______ Total liabilities and stockholders' equity $ 12,739 $13,031 ======== ======= See Notes to Condensed Consolidated Financial Statements. EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, __________________ _________________ 2005 2004 2005 2004 _______ _______ _______ ________ Revenues, net: Investment advisory and management fees $ 2,295 $ 1,065 $ 4,075 $ 1,852 Operating expenses: Employee related costs (excluding stock-based compensation) 2,342 1,098 4,053 2,582 Professional fees and services 128 164 347 444 General and administrative 771 648 1,413 1,175 Stock-based compensation 1,068 792 2,252 1,554 _______ _______ _______ _______ Total operating expenses 4,309 2,702 8,065 5,755 _______ _______ _______ _______ Operating loss from continuing operations (2,014) (1,637) (3,990) (3,903) _______ _______ _______ _______ Other income: Interest and other income 222 195 435 390 Realized gain on investments 45 - 96 - _______ _______ _______ _______ Total other income 267 195 531 390 _______ _______ _______ _______ Loss from continuing operations, before income taxes (1,747) (1,442) (3,459) (3,513) _______ _______ _______ _______ Provision (benefit) for income taxes - - - - _______ _______ _______ _______ Loss from continuing operations, net of taxes (1,747) (1,442) (3,459) (3,513) _______ _______ _______ _______ Income from discontinued operations, net of $0 taxes - - - (1) Gain from sale of discontinued operations, net of $0 taxes - - - 572 _______ _______ _______ _______ Net loss $(1,747) $(1,442) $(3,459) $(2,942) ======= ======= ======= ======= Basic and diluted loss per share: Loss from continuing operations $ (.09) $ (.08) $ (.19) $ (.20) Income from discontinued operations - - - .03 _______ _______ _______ _______ Basic and diluted loss per share $ (.09) $ (.08) $ (.19) $ (.17) ======= ======= ======= ======= See Notes to Condensed Consolidated Financial Statements. EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED DECEMBER 31, 2005 (Dollars and shares in thousands) (Unaudited) Common Stock Additional Unearned ______________ Paid-In Stock Accumulated Shares Amount Capital Compensation Deficit Totals ______ ______ __________ ____________ ___________ _______ Balance June 30, 2005 18,258 $182 $24,404 $(7,480) $ (7,529) $ 9,577 Net issuance of restricted stock 463 5 2,196 (1,919) 282 Amortization of stock-based compensation 1,970 1,970 Net loss (3,459) (3,459) ______ ____ _______ _______ ________ _______ Balance December 31, 2005 18,721 $187 $26,600 $(7,429) $(10,988) $ 8,370 ====== ==== ======= ======= ======== ======= See Notes to Condensed Consolidated Financial Statements.
EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Six Months Ended December 31, __________________ 2005 2004 _______ ________ Operating activities: Net loss $(3,459) $ (2,942) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Gain on sale of discontinued operations - (572) Loss from discontinued operations - 1 Realized gain on investment (96) - Stock-based compensation 2,252 1,554 Depreciation 164 60 Changes in assets and liabilities: (Increase) in accounts receivable (746) (981) (Increase) in prepaid expenses (108) (67) (Increase) decrease in security deposits 220 (3) Increase (decrease) in accounts payable and other current liabilities 817 (835) (Decrease) in Federal income tax payable - (1,373) Increase (decrease) in deferred rent 98 (11) Other, net - (3) _______ ________ Net cash used in operating activities (858) (5,172) _______ ________ Investing activities: Redemption of short-term investments - 4,967 Proceeds from investment 96 - Security deposits paid - (500) Purchase of property and equipment (157) (625) _______ ________ Net cash provided by (used in) investing activities (61) 3,842 _______ ________ Financing activities: Net cash provided by financing activities - - _______ ________ Net increase (decrease) in cash and cash equivalents (919) (1,330) Cash and cash equivalents at beginning of period 8,550 10,801 _______ ________ Cash and cash equivalents at end of period $ 7,631 $ 9,471 ======= ======== Supplemental disclosures of cash flow data: Cash paid for: Federal income taxes $ - $ 1,373 Interest $ - $ 110 Non-cash investing and financing activities: Note receivable from sale of discontinued operations $ - $ 200 See Notes to Condensed Consolidated Financial Statements. EPOCH HOLDING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Significant Accounting Policies and Business Business: Epoch Holding Corporation ("Epoch" or the "Company") is a holding company whose primary line of business is investment management and investment advisory services. The operations of the Company are conducted through its wholly-owned subsidiary, Epoch Investment Partners, Inc. ("EIP"). EIP is a registered investment advisor under the Investment Advisers Act of 1940 (the "Investment Advisers Act"). EIP's primary operations are to provide investment advisory and investment management services to retirement plans, mutual funds, endowments, foundations and high net worth individuals. Principles of consolidation and basis of presentation: The accompanying unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions are eliminated. The Company's fiscal year ("FY") ends on June 30. In the opinion of Management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the Company's financial position as of December 31, 2005 and June 30, 2005, the results of its operations for the three and six months ended December 31, 2005 and 2004 and its cash flows for the six months ended December 31, 2005 and 2004. The results for the three and six months ended December 31, 2005 and 2004 are not necessarily indicative of results for a full year. Information included in the condensed consolidated balance sheet as of June 30, 2005 has been derived from the Company's Annual Report to the SEC on Form 10-K for the fiscal year ended June 30, 2005 (the "2005 Form 10-K"). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and disclosures included in the 2005 Form 10-K. Company Structure and Discontinued Operations: Operations commenced under the existing structure on June 2, 2004 when a subsidiary of J Net Enterprises, Inc. ("J Net"), the predecessor to Epoch, merged with EIP in a business combination which resulted in the former EIP stockholders owning 51% of the issued and outstanding equity securities of J Net immediately following the transaction. As a result of the majority of ownership interest in the Company being held by the former EIP stockholders, the business combination was accounted for as a reverse merger. Under generally accepted accounting principles in the United States of America, the legally acquired company (in this case, EIP), became the surviving entity for financial reporting purposes. EIP was formed on April 14, 2004 and did not have a predecessor business. Prior to the June 2, 2004 business combination, J Net conducted operations in the Internet-based e-commerce industry. Immediately following the closing of the transaction with EIP, Management initiated a formal plan to dispose of the Internet-based business and shift its business focus and capital resources to the operations of EIP. In September 2004, the Internet-based operations were sold to the management of that business segment. The results of operations for that business segment have been reported as discontinued operations. Business segments: The Company's primary line of business is the investment advisory and investment management business. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates. Cash equivalents: Cash equivalents are liquid investments comprised primarily of debt instruments and money market accounts with maturities of three months or less when acquired. Cash equivalents are stated at cost which approximates fair value due to their short maturity. Short-term investments: The Company owned short-term investments in Mariner Partners, L.P. ("Mariner"), a private investment fund. The Company classified those securities as short-term investments and recorded changes in the value of the accounts in the item captioned interest and other income in the accompanying Consolidated Statement of Operations. In July 2004, the Company began liquidating its short-term investments in Mariner. The account was fully liquidated by September 2004. The Company has not held a position with Mariner or any other short-term investments since that date. Fair value of financial instruments: The carrying value of certain of the Company's financial instruments, including accounts receivable, accounts payable and accrued expenses, approximates fair value due to their short maturities. Financial instruments with concentration of credit risk: The financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. Epoch invests its cash and cash equivalents with financial institutions in amounts which, at times, may be in excess of the FDIC insurance limits. Cash is also invested in several high-grade securities which limits exposure to concentrations of credit risk. Revenue recognition: Investment advisory and management fees are generally recognized as services are provided pursuant to specific terms contained in advisory or sub-advisory contracts between EIP and its clients. Such contracts generally call for revenue to be determined as a percentage of assets under management ("AUM"). Generally, fees are billed on a quarterly basis, in arrears. Advance payments, if received, are deferred and recognized during the periods for which services are provided. The Company performs services for mutual funds under advisory and sub- advisory contracts. Fees for these contracts are calculated based upon the daily net assets of the respective fund. Generally, advisory payments from the mutual funds are received monthly, while sub-advisory payments are received quarterly. The Company also has certain contracts which contain "incentive clauses" which allow the Company to collect additional fees in the event that investment returns meet or exceed targeted amounts in the contracts. Revenues for these incentives are recognized only when such performance targets are met or exceeded at the end of the contracts' year, typically at the end of each calendar year. No revenues are recognized until the contract year ends, even when investment returns are exceeding the contractual targets within the contract year, due to the inability to forecast financial markets. Investments in Technology-Related Businesses: The Company holds minority investments in privately held, nonpublic technology-related companies. Ownership in these companies ranges from less than 1% to 19.99%. The Company uses the cost method to account for these investments. As of December 31, 2005, the Company held investments in four private companies which continued to conduct business operations: Tellme Networks, Inc., eStara, Inc., Strategic Data Corporation and a privately held fund of other technology-related companies. The Company also held investments in several inactive technology-related companies. Only one such investment, Tellme Networks, Inc., continues to have any value ascribed. The Company received $45 thousand from one of the inactive technology- related companies for the three months ended December 31, 2005 and $96 thousand for the six months ended December 31, 2005. The investment is expected to liquidate by March 31, 2006. The Company may receive another small distribution in satisfaction of its 19.99% interest in the investment. There are no plans to make additional investments in technology-related businesses in the future. It is the policy of the Company to evaluate its investments in technology- elated businesses for possible impairment on a quarterly basis. Management uses a number of different criteria when evaluating an asset for possible impairment. Indicators such as significant decreases in market value of an investment, discounted cash flow analyses, adverse changes in the business climate, legal matters, losses of significant customers, new technologies which could accelerate obsolescence of business products, sustained operating losses, and cash flows which cannot be resolved or improved within a reasonable amount of time to justify continued business operations are used by Management when making its evaluations. Stock-based compensation: Effective July 1, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment" ("SFAS 123R") which requires employee and qualifying director share-based payments to be accounted for using the fair value method. The fair value of the Company's restricted stock awards is based on the closing price of the Company's common stock at the grant date. Share-based compensation costs related to equity instruments are charged against income ratably over the fixed vesting period for the related equity instruments, with the initial charge generally recorded in the first full month following the grant. The accounting treatment of restricted stock awards under SFAS 123R is consistent with that of the Company's previous policies under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and the pro forma disclosures required in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Under the modified prospective transition method chosen by the Company, compensation costs related to the non-vested portion of stock option awards outstanding at the adoption date are based on the grant-date fair value of those awards as calculated for pro forma disclosures under the original provisions of SFAS 123. Outstanding stock options previously granted under the Company's plan that expired on September 30, 2002 were fully vested prior to June 30, 2005; therefore, there are no deferred compensation costs resulting from stock options to be accounted for on a prospective basis. Accounts receivable: The Company's trade accounts receivable balances do not include an allowance for doubtful accounts and there have been no bad debt expenses recognized during the three and six month periods ended December 31, 2005 and 2004. These receivables are advisory and sub-advisory fees, and Management believes they are fully collectible. Property and equipment: Leasehold improvements are recorded at cost and are depreciated on a straight-line basis over the shorter of their estimated useful lives or lease term, as applicable. Property and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives. Generally, the useful lives are 3 to 10 years for leasehold improvements and 3 to 7 years for equipment, and exclude option periods, if any. Property sold or retired is eliminated from the accounts in the period of disposition. Software used to conduct the investment advisory and investment management services is amortized using a three-year estimated useful life. Income taxes: The Company accounts for income taxes in accordance with Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires that deferred tax assets and liabilities arising from temporary differences between book and tax basis will be recognized using enacted rates at the time such temporary differences reverse. In the case of deferred tax assets, SFAS 109 requires a reduction in deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Reclassifications: Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation. Note 2 - Earnings (loss) per share Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common and common equivalent shares outstanding during the period. The calculation of earnings (loss) per share excluded 1,267,500 and 1,405,000 issued and outstanding stock options, at December 31, 2005 and 2004, respectively, as their effect was antidilutive. While there were 137,500 options deemed to be "in the money" at December 31, 2005, the effect of their exercise would still be considered antidilutive as the Company was in a net loss position. The following is the amount of loss and number of shares used in the basic and diluted earnings (loss) per share computations for the three and six months ended December 31, 2005 and 2004 (dollars and shares in thousands, except per share data): Three Months Ended Six Months Ended December 31, December 31, ___________________ _________________ 2005 2004 2005 2004 _______ _______ _______ _______ Loss from continuing operations $(1,747) $(1,442) $(3,459) $(3,513) ======= ======= ======= ======= Income from discontinued operations $ - $ - $ - $ 571 ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding 18,730 17,895 18,539 17,865 ======= ======= ======= ======= Basic and diluted loss per share from continuing operations $ (.09) $ (.08) $ (.19) $ (.20) ======= ======= ======= ======= Basic and diluted earnings per share from discontinued operations $ - $ - $ - $ .03 ======= ======= ======= ======= Note 3 - Related party transactions There have been no related party transactions for the three and six months ended December 31, 2005. For the three and six months ended December 31, 2004, the Company incurred rent and other related occupancy expenses payable to Berenson & Company of approximately $96 thousand and $153 thousand, respectively. The Chief Executive Officer of Berenson & Company is a Director and stockholder of the Company. Epoch entered into a long- term lease on September 15, 2004 with an unrelated party and relocated its offices on February 14, 2005. There have been no related party transactions with Berenson & Company since such date. Note 4 - Federal income tax The Company completed a reverse merger business combination with EIP on June 2, 2004. As a result, the ability to utilize certain net operating loss carryfowards ("NOL's") became limited as a result of a greater than 50% change in ownership. These limitations are covered by Section 382 of the Internal Revenue Code ("IRC"). Section 382 limits the annual utilization of NOL's accumulated prior to the ownership change to a percentage of the acquired entity's fair value at the time of the change in ownership. As a result, the Company's ability to utilize accumulated NOL's to their full extent prior to their expiration cannot be reasonably assured. Until profitability can be achieved, and utilization of NOL's can be more definitive, the Company has provided a full valuation allowance on its accumulated NOL's and temporary differences. The Company has recently undergone an audit by the Internal Revenue Service (the "IRS") with respect to its fiscal years ended June 30, 2001 and June 30, 2002 (the "audit period"). In July 2004, the Company paid $1.5 million for tax items associated with the IRS audit. In January 2005, the Company received an additional inquiry from the IRS related to calculations of alternative minimum taxes for the audit period. In May 2005, the Company met with the IRS and presented pertinent data and other factual information which demonstrated that no additional taxes were due. In August 2005, the Company received notice indicating the IRS submitted a special report to the congressional Joint Committee on Taxation (the "Joint Committee"), outlining the findings of the audit, and concurring with the Company's position. In September 2005, the Company received notice from the IRS that the Joint Committee had completed its consideration of the IRS' report, and had taken no exception to the conclusions reached by the IRS. The Company is expecting a refund of income taxes of approximately $200 thousand, which will be reduced by assessable "restricted interest" on the potential tax deficiency prior to the application of NOL's carried back. No refund or assessable interest amounts have been accrued at December 31, 2005 because the Company has not received a final accounting from the IRS. Note 5 - Commitments and Contingencies Employment agreements: There are no employment agreements with officers of the Company. There are agreements, subject to the attainment of certain performance criteria or, in certain cases, continuation or termination of employment, to pay bonuses or severance payments. Such obligations, under the various agreements, total approximately $1.5 million at December 31, 2005. Of this amount, approximately $0.1 million represents restricted stock awards to be issued during FY 2006. The Company is obligated to enter into an agreement with its Chief Executive Officer, William W. Priest, prior to the third anniversary of the business combination with EIP. Terms of the contract are to be customary for Chief Executive Officers of peer group companies. Legal proceedings: From time to time, the Company or its subsidiaries may become parties to claims, legal actions and complaints arising in the ordinary course of business. Management is not aware of any claims which would have a material adverse effect on its consolidated financial position. Significant customers and contracts: For the three months ended December 31, 2005, CI Mutual Funds Inc. of Canada ("CI") accounted for approximately 21% of revenues while the Epoch International Small Cap Fund ("EPIEX"), a publicly traded mutual fund for which the Company acts as the advisor, accounted for approximately 13%. For the three months ended December 31, 2004, CI and EPIEX accounted for approximately 35% and 0% of consolidated revenues, respectively. For the six months ended December 31, 2005, CI and EPIEX accounted for 25% and 13% of consolidated revenues, respectively. For the six months ended December 31, 2004, CI and EPIEX accounted for 37% and 0% of consolidated revenues, respectively. The Company's services and relationship with these clients is important to the ongoing growth strategy, and retention of these customers is significant to the ongoing results of operations and liquidity of the Company. Note 6 - Discontinued operations: In September 2004, the Company completed the sale of its e-commerce software operations to the former management of that segment. Consideration to the Company came in the form of a 19.9% membership interest in the buyer's entity, the assumption by the buyer of liabilities of $466 thousand, and the issuance of a $534 thousand secured promissory note (the "Note") to the Company. The Note was due 5 years from the date of issuance, bore interest at 6.5% per annum and was secured by all of the assets that were purchased in the transaction. Payments of principal on the Note were to be made at a rate of 50% of the annual cash flows from operations, as defined in the agreement, in excess of $300 thousand. The Company recorded the Note at its estimated fair value of approximately $200 thousand. Factors affecting the estimate were the non-marketable status of the Note and certain risks in reaching cash flow targets for payment. On May 16, 2005 the Company collected the full $534 thousand. The receipt fully discharged the Note and required the Company to record a gain of $334 thousand in the fourth quarter of FY 2005. Selected financial data - discontinued operations Following are the final summary operating results of the discontinued operations, which represent the fiscal 2005 period of July 1, 2004 through the date of sale, September 9, 2004 (dollars in thousands): July 1, 2004 - September 9, 2004 ________________________________ Revenues $ 293 Costs and expenses (294) _____ Loss from discontinued operations before taxes (1) Provision for income taxes - (a) Gain on sale of discontinued operations 572 _____ Income from discontinued operations $ 571 ===== (a) There are no income taxes due to utilization of available net operating loss carryforwards. Note 7 - Subsequent events On January 31, 2006 the Company issued 156,986 restricted stock awards to employees of the Company. Recipients of the restricted awards were immediately vested in 12.5% of the total shares received. The remaining 87.5% of unvested shares will vest over the next three years, subject to the recipients remaining as employees of the Company or any of its subsidiaries. Issuance of these awards will result in total stock compensation expense of $0.9 million over the vesting period, assuming no forfeitures. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain information included in this Quarterly Report on Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission ("SEC") contain statements that may be considered forward-looking. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial performance based on the Company's growth strategies and anticipated trends in the Company's business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. See "Factors Which May Affect Future Results". These risks and uncertainties are not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors which could adversely impact the Company's business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for the Company's management to predict all risks and uncertainties, nor can the Company assess the impact of all factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although the Company believes the expectations reflected in the forward- looking statements are reasonable, the Company cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The Company is under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q, nor to conform the Company's prior statements to actual results or revised expectations, and the Company does not intend to do so. Forward-looking statements include, but are not limited to, statements about: . the Company's business strategies and investment policies, . the Company's possible or assumed future results of operations and operating cash flows, . the Company's financing plans and the availability of short-term borrowing, . the Company's competitive position, . potential growth opportunities available to the Company, . the recruitment and retention of the Company's managing directors and employees, . the Company's expected levels of compensation, . the Company's potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts, . the likelihood of success and impact of litigation, . the Company's expected tax rates, . the Company's expectations with respect to the economy, securities markets, the market for mergers and acquisitions activity, the market for asset management activity and other industry trends, . the benefits to the Company resulting from the effects of separation and recapitalization transactions and additional financing transactions, . the effects of competition on the Company, and . the impact of future legislation and regulation on the Company. Overview Epoch Holding Corporation ("Epoch" or the "Company") is a holding company whose primary line of business is investment management and investment advisory services. The operations of the Company are conducted through its wholly-owned subsidiary, Epoch Investment Partners, Inc. ("EIP"). EIP is a registered investment advisor under the Investment Advisers Act of 1940 (the "Investment Advisers Act"). The Company maintains a website which contains current information on operations and other corporate governance matters. The website address is www.eipny.com. Through the Investor Relations section of our website, we make available our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Company Structure and Discontinued Operations On June 2, 2004, a subsidiary of J Net Enterprises, Inc. ("J Net"), the predecessor to Epoch, merged with EIP in a business combination which resulted in the former EIP stockholders owning 51% of the issued and outstanding equity securities of J Net immediately following the transaction. As a result of the majority of ownership interest in the Company being held by the former EIP stockholders, the business combination was accounted for as a reverse merger. Under generally accepted accounting principles in the United States of America, the legally acquired company (in this case, EIP), became the surviving entity for financial reporting purposes. EIP was formed on April 14, 2004 and did not have a predecessor business. Prior to the June 2, 2004 business combination, J Net conducted operations in the Internet-based e-commerce industry. Immediately following the closing of the transaction with EIP, Management initiated a formal plan to dispose of the Internet-based operations and shift its business focus and capital resources to the operations of EIP. In September 2004, the Internet-based operations were sold to the existing management of that business segment. The results of operations for that business segment have been reported as discontinued operations. Results of operations - three months ended December 31, 2005 and 2004 Assets Under Management Assets under management increased to $2.23 billion at December 31, 2005, or 121%, from $1.01 billion at December 31, 2004. The percentage of assets under management from CI Mutual Funds, Inc. of Canada ("CI"), a significant customer, declined to approximately 50% at December 31, 2005, from approximately 75% at December 31, 2004. Revenues Total revenues from investment management and advisory services were $2.3 million for the three months ended December 31, 2005 and included $0.1 million in incentive fees earned from investment performance in calendar 2005. Total revenue from investment management and advisory services were $1.1 million for the three months ended December 31, 2004 and included $0.2 million in incentive fees earned from investment performance in calendar 2004. The subadvisory contract with CI accounted for approximately 21% of revenues for the three months ended December 31, 2005. For the three months ended December 31, 2004, CI accounted for approximately 35% of revenues. Employee related costs Costs in this category include salaries, benefits, incentive compensation, signing bonuses and commission expenses. For the three months ended December 31, 2005, these expenses were $2.3 million, as compared to $1.1 million for the three months ended December 31, 2004. The total costs for the three months ended December 31, 2005, include $1.2 million of performance and guaranteed bonuses or advances on sales commissions which are non-refundable but can be applied against future sales, as compared to $0.2 million for the three months ended December 31, 2004. Professional fees and services These expenses consist primarily of outside legal fees for Securities and Exchange Commission compliance, general corporate legal affairs, independent accountants' fees, and other professional contractors. For the three months ended December 31, 2005, such fees totaled $0.1 million, as compared to $0.2 million for the three months ended December 31, 2004. General and administrative expenses These costs consist primarily of office rentals, travel and entertainment, advertising and marketing, information technology-related expenses, utilities, insurance, and other office-related costs. Expenses totaled $0.8 million for the three months ended December 31, 2005, as compared to $0.6 million for the three months ended December 31, 2004. Stock-based compensation Stock-based compensation for the three months ended December 31, 2005 and 2004 totaled $1.1 million and $0.8 million, respectively. Stock-based compensation includes 5.5 million shares of restricted stock that was issued to employee owners associated with the acquisition of EIP, as well as restricted stock issued to employees during fiscal year 2005 and the six months ended December 31, 2005. Compensation expense is recognized ratably over the three-year vesting period of those awards, in accordance with their underlying vesting provisions. In the three months ended December 31, 2005, 5,208 shares of restricted stock were issued to employees. A total of 651 shares of the awards, representing 12.5% of the shares issued, were immediately vested. The remaining 87.5% of the shares vest ratably over the subsequent three years. Approximately 13,573 shares were forfeited by terminated employees in the three months ended December 31, 2005. There were no employee stock awards or forfeitures in the three months ended December 31, 2004. During the three months ended December 31, 2005 and December 31, 2004, no stock awards were granted to Directors of the Company. The currently outstanding Directors' shares are subject to a three-year vesting period and vest one-third each year, or immediately in the event of death or disability. Compensation expense is recognized ratably over the three-year vesting period of those awards, in accordance with their underlying vesting provisions. Other income Other income includes interest earnings from cash and cash equivalents and rental income from subleased office space in New York. Also included in other income is a gain from an investment to which the Company ascribed no value. Results of operations - six months ended December 31, 2005 and 2004 Assets Under Management Assets under management increased to $2.23 billion at December 31, 2005, or 121%, from $1.01 billion at December 31, 2004. The percentage of assets under management from CI Mutual Funds, Inc. of Canada ("CI"), a significant customer, declined to approximately 50% at December 31, 2005, from approximately 75% at December 31, 2004. Revenues Total revenues from investment management and advisory services were $4.1 million for the six months ended December 31, 2005 and included $0.1 million in incentive fees earned from investment performance in calendar 2005. Total revenue from investment management and advisory services were $1.9 million for the six months ended December 31, 2004 and included $0.2 million in incentive fees earned from investment performance in calendar 2004. The subadvisory contract with CI accounted for approximately 25% of revenues for the six months ended December 31, 2005. For the six months ended December 31, 2004, CI accounted for approximately 37% of revenues. Employee related costs Costs in this category include salaries, benefits, incentive compensation, signing bonuses and commission expenses. For the six months ended December 31, 2005, these expenses were $4.1 million, as compared to $2.6 million for the six months ended December 31, 2004. The total costs for the six months ended December 31, 2005 include $1.9 million of performance and guaranteed bonuses or advances on sales commissions which are non-refundable but can be applied against future sales, as compared to $0.8 million for the six months ended December 31, 2004. Professional fees and services These expenses consist primarily of outside legal fees for Securities and Exchange Commission compliance, general corporate legal affairs, independent accountants' fees, and other professional contractors. For the six months ended December 31, 2005, such fees totaled $0.3 million, as compared to $0.4 million for the six months ended December 31, 2004. General and administrative expenses These costs consist primarily of office rentals, travel and entertainment, advertising and marketing, information technology-related expenses, utilities, insurance, and other office-related costs. Expenses totaled $1.4 million for the six months ended December 31, 2005, as compared to $1.2 million for the six months ended December 31, 2004. Stock-based compensation Stock-based compensation for the six months ended December 31, 2005 and 2004 totaled $2.3 million and $1.6 million, respectively. Stock-based compensation includes 5.5 million shares of restricted stock that was issued to employee owners associated with the acquisition of EIP, as well as restricted stock issued to employees during fiscal year 2005 and the six months ended December 31, 2005. Compensation expense is recognized ratably over the three-year vesting period of those awards, in accordance with their underlying vesting provisions. In the six months ended December 31, 2005, 477,000 shares of restricted stock were issued to employees. A total of 59,625 shares of the awards, representing 12.5% of the shares issued, were immediately vested. The remaining 87.5% of the shares vest ratably over the subsequent three years. Approximately 13,573 shares were forfeited by terminated employees in the six months ended December 31, 2005. There were no employee stock awards or forfeitures in the six months ended December 31, 2004. During the six months ended December 31, 2005, Directors of the Company were awarded 70,000 shares for their fiscal 2005 services and 58,000 shares in advance of their fiscal 2006 service. The currently outstanding Directors' shares are subject to a three-year vesting period and vest one- third each year, or immediately in the event of death or disability. Compensation expense is recognized ratably over the three-year vesting period of those awards, in accordance with their underlying vesting provisions. Other income Other income includes interest earnings from cash and cash equivalents and rental income from subleased office space in New York. Also included in other income is a gain from an investment to which the Company ascribed no value. Liquidity and Capital Resources Sources of funds for the Company's operations are derived from investment management and investment advisory fees and interest on the Company's cash and cash equivalent investments. As of December 31, 2005, the Company had $7.6 million of cash and $2.0 million of receivables to fund its business growth strategy. Trade payables, which consist primarily of professional fees, trade payables and accrued benefits were $3.1 million. There was no debt and Management does not foresee any reason to incur debt unless a significant business opportunity warrants such action. For the six months ended December 31, 2005, net cash used in operating activities was $0.9 million, primarily attributable to cash-based operating expenses, as compared to $5.2 million in the six months ended December 31, 2004. The six month period ended December 31, 2004 included expenditures of $1.5 million related to payment of income taxes and interest for fiscal years 2001 and 2002, start-up and signing bonus costs of $0.4 million, and $0.5 million to secure a letter of credit for the Company's lease deposit at 640 Fifth Avenue, New York, New York. The Company expects to continue to increase staff in Fiscal Year 2006 ("FY 2006") to support the forecasted increased AUM base and the related distribution efforts for its products. Despite the incurrence of operating losses that are expected to occur in FY 2006, Management believes the existing cash and cash equivalents are adequate to provide the necessary resources to implement its growth objectives. Contractual obligations Leases: The Company has a long-term office space lease in New York City, where its primary business operations are conducted. Future minimum lease payments under this lease total $6.7 million and are presented on the table which follows (fiscal years ending June 30, dollars in thousands). Fiscal Years Ended June 30, _______________________________________ 2007 - 2010 - 2012 and 2006 2009 2011 thereafter Total ____ ______ ______ __________ ______ Future minimum payments $333 $1,997 $1,370 $3,048 $6,748 ==== ====== ====== ====== ====== The Company also has other office lease commitments in New York, California and Texas, and operating leases for office equipment. An office lease in New York is subleased to an unrelated third party. While the Company remains the primary responsible party under that lease, the tenant is performing its obligations under the sublease in a timely fashion. A schedule of these other lease commitments and the related sublease income as of December 31, 2005 follows (fiscal years ending June 30, dollars in thousands): Fiscal Years Ended June 30, _________________________________________ 2007 - 2010 - 2012 and 2006 2009 2011 thereafter Total ____ ______ ______ __________ _____ Lease payments $ 274 $ 1,496 $ 652 $ - $ 2,422 Sublease income (274) (1,708) (765) - (2,747) _____ _______ _____ _____ _______ Net (income) commitment $ - $ (212) $(113) $ - $ (325) ===== ======= ===== ===== ======= Factors Which May Affect Future Results There are numerous risks which may affect the results of operations of the Company. Factors which could affect the Company's success include, but are not limited to, the Company's limited operating history in the investment management and investment advisory business, the ability to attract and retain clients, performance of the financial markets and invested assets managed by the Company, retention of key employees, misuse of assets and information by employees, system failures, significant changes in regulations, the costs of compliance associated with existing regulations and the penalties associated with non-compliance, and the risks associated with loss of key members of the management team. In addition, the Company's ability to expand or alter its product offerings, whether through acquisitions or internal development is critical to its long-term success and has inherent risks. This success is dependent on the ability to identify and fund those products or acquisitions on terms, which are favorable to the Company. There can be no assurance that any of these operating factors or acquisitions can be achieved, or that, if undertaken, they will be successful. Item 3. Quantitative and Qualitative Disclosure About Market Risk The Company invests its free cash in various financial instruments and money markets, which entail certain risks. Presently, the Company does not participate in hedging activities nor does it have any derivative financial instruments. Cash and cash equivalents, including instruments which earn interest over short periods of time (7-35 days), are exposed to market risk due to changes in interest rates, which impacts interest income. Cash balances also exceed amounts which are guaranteed by the Federal Deposit Insurance Corporation. The Company maintains its cash in institutions which have superior credit ratings and consistently monitors the quality of the institution where its cash is deposited. The value of AUM can be affected by changes in interest rates and fluctuations in financial markets. The Company's revenue is derived from the value of AUM. Therefore, revenues and results of operations can be negatively affected by adverse changes in the prices of securities or interest rates. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures. Management, with the participation of the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company's principal executive officer and principal financial officer have concluded that as of such date, the Company's disclosure controls and procedures were designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms and were effective. Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a- 5(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company or its subsidiaries may become parties to claims, legal actions and complaints arising in the ordinary course of business. Management is not aware of any claims which would have a material adverse effect on its consolidated financial position. Item 4. Submission of Matters to a Vote of Security Holders. This item is incorporated by reference to a Form 8-K filed by the Registrant on November 17, 2005. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 31.1 Principal Executive Officer Certification 31.2 Principal Financial Officer Certification 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: Date of Report Item(s) Description _________________ ______ _____________________________ November 15, 2005 8.01 The Company announces results of 2005 Annual Meeting of Stockholders Signature Pursuant to the requirements 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. EPOCH HOLDING CORPORATION (Registrant) By: /s/ Adam Borak ________________________ Adam Borak Chief Financial Officer Date: February 14, 2006 EX-31 2 ex312.txt Exhibit 31.2 CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF EPOCH HOLDING CORPORATION I, Adam Borak, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Epoch Holding Corporation; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of registrant as of, and for, the periods presented in this report; and (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [paragraph omitted in accordance with SEC transition instructions contained in SEC release 34-47986] and (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth annual quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: February 14, 2006 By: /s/ Adam Borak _____________________________ Adam Borak Chief Financial Officer (Principal Financial Officer) EX-31 3 ex311.txt Exhibit 31.1 CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER OF EPOCH HOLDING CORPORATION I, William W. Priest, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Epoch Holding Corporation; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of registrant as of, and for, the periods presented in this report; and (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [paragraph omitted in accordance with SEC transition instructions contained in SEC release 34-47986] and (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth annual quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: February 14, 2006 By: /s/ William W. Priest _____________________________ William W. Priest Chief Executive Officer (Principal Executive Officer) EX-32 4 ex32.txt Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Epoch Holding Corporation (the "Company") on Form 10-Q for the quarter ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), William W. Priest, Chief Executive Officer of the Company, and Adam Borak, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. Dated: February 14, 2006 By: /s/ William W. Priest _____________________________ William W. Priest Chief Executive Officer (Principal Executive Officer) Dated: February 14, 2006 By: /s/ Adam Borak _____________________________ Adam Borak Chief Financial Officer (Principal Financial Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----