10-Q 1 form10q9302001.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 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. 0-6729 FIRST MONTAUK FINANCIAL CORP (Exact name of registrant as specified in its charter) New Jersey 22-1737915 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) Parkway 109 Office Center, 328 Newman Springs Rd., Red Bank, NJ 07701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 842-4700 Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (l) 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 8,625,284 Common Shares, no par value, were outstanding as of November 7, 2001. Page 1 of 14 02 FIRST MONTAUK FINANCIAL CORP FORM 10-Q SEPTEMBER 30, 2001 INDEX Page PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Statements of Financial Condition as of September 30, 2001 and December 31, 2000 ....... 3 Consolidated Statements of Income for the Nine Months ended September 30, 2001 and 2000 and Three Months ended September 30, 2001 and 2000 ...... 4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2001 and 2000 ...... 5 Notes to Financial Statements .......................... 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .........8-11 PART II. OTHER INFORMATION: Item 5. Other Information................................ 12 Item 6. Exhibits and Reports on Form 8-K................. 12 Signatures ............................................... 13 03 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September December 31, 2001 2000 ASSETS Cash and cash equivalents $ - $ 3,701,010 Due from clearing firms 4,536,804 2,405,666 Commissions receivable 68,506 39,200 Trading and investment account securities 1,097,720 3,975,309 Employee and broker receivables 2,049,348 1,609,666 Global leases receivable 21,020 174,661 Notes receivable - 18,000 Due from officers 199,923 175,068 Property and equipment - net 2,051,553 2,304,533 Deferred income taxes - net 2,232,150 1,721,262 Other assets 1,501,525 788,688 ----------- ------------ Total assets $ 13,758,549 $ 16,913,063 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deferred income $ 3,633,333 $ 3,933,333 Securities sold, but not yet purchased, at market 314,900 386,459 Notes payable 328,424 559,179 Commissions payable 2,837,416 1,637,733 Accounts payable 943,197 450,974 Accrued expenses 883,647 840,578 Income taxes payable 7,111 875,786 Other liabilities 668,677 519,630 ----------- ------------ Total liabilities 9,616,705 9,203,672 ----------- ------------ Temporary equity - stock subject to redemption 6,500 6,500 Commitments and contingencies (See Notes) Stockholders' equity Preferred Stock, 4,375,000 shares authorized, $.10 par value, no shares issued and outstanding - - Series A Convertible Preferred Stock, 625,000 shares authorized, $.10 par value, 331,190 and 349,511 shares issued and outstanding, respectively; liquidation preference: $1,655,950 at September 30, 2001 33,119 34,951 Common Stock, no par value, 30,000,000 shares authorized, 8,744,485 and 9,309,309 shares issued, 8,622,284 and 8,822,409 outstanding, respectively 3,489,622 4,063,397 Additional paid-in capital 4,076,666 4,253,765 Retained earnings (accumulated deficit) (3,319,260) 230,921 Less: Deferred compensation (89,824) (393,120) Less: Treasury stock (54,979) (487,023) ----------- ------------ Total stockholders' equity 4,135,344 7,702,891 ----------- ------------ Total liabilities and stockholders' equity $ 13,758,549 $ 16,913,063 =========== ============ See notes to financial statements.
04 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) Nine months ended September 30, Three months ended September 30, 2001 2000 2001 2000 Revenues: Commissions $ 28,089,695 $ 37,765,633 $ 8,206,662 $ 10,122,888 Principal transactions 5,542,395 8,031,153 1,540,318 1,226,532 Investment banking 1,385,937 2,448,489 1,028,428 669,663 Interest and other income 3,495,974 2,258,924 1,417,509 651,950 ------------ ------------- ------------- -------------- 38,514,001 50,504,199 12,192,917 12,671,033 ------------ ------------- ------------- -------------- Expenses: Commissions, employee compensation and benefits 31,587,339 38,317,291 10,055,199 10,671,549 Clearing and floor brokerage 2,434,950 3,278,104 730,638 878,429 Communications and occupancy 2,343,288 2,092,461 887,274 610,828 Legal matters and related costs 2,166,501 572,016 1,389,558 249,156 Other operating expenses 3,839,977 3,322,906 952,848 817,273 Interest 118,664 146,801 43,755 32,345 ------------ ------------- ------------- -------------- 42,490,719 47,729,579 14,059,272 13,259,580 ------------ ------------- ------------- -------------- Income (loss) before income taxes(income tax benefit) (3,976,718) 2,774,620 (1,866,355) (588,547) Income taxes (income tax benefit) (499,682) 1,132,626 208,108 (198,374) ------------ ------------- ------------- -------------- Net income (loss) before extraordinary item (3,477,036) 1,641,994 (2,074,463) (390,173) Extraordinary loss-extinguishment of debt, net of tax - (34,200) - - ------------ ------------- ------------- -------------- Net income (loss) $ (3,477,036) $ 1,607,794 $ (2,074,463) $ (390,173) ============ ============= ============= ============== Net income (loss) applicable to common stockholders $ (3,550,181) $ 1,532,012 $ (2,099,303) $ (414,876) ============ ============= ============= ============== Per share of Common Stock: Basic: Before extraordinary loss $ (0.41) $ 0.16 $ (0.24) $ (0.04) Extraordinary loss - - - - ------------ ------------- ------------- -------------- Net income (loss) $ (0.41) 0.16 (0.24) (0.04) ============ ============= ============= ============== Diluted: Before extraordinary loss $ (0.41) $ 0.15 $ (0.24) $ (0.04) Extraordinary loss - - - - ------------ ------------- ------------- -------------- Net income (loss) $ (0.41) $ 0.15 $ (0.24) $ (0.04) ============ ============= ============= ============== Number of common shares used in basic income (loss) per share 8,731,099 9,560,256 8,714,904 9,394,457 ============ ============= ============= ============== Number of common shares used in diluted income (loss) per share 8,731,099 11,018,623 8,714,904 9,394,457 ============ ============= ============= ============== See notes to financial statements.
05 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2001 2000 INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income (loss) $ (3,477,036) $ 1,607,794 -------------- ------------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 436,302 449,202 Amortization 148,635 240,154 Reserves and allowances 200,000 149,640 Increase (decrease) in cash attributable to changes in assets and liabilities Due from clearing firms (2,131,138) 3,931,370 Trading and investment account securities 2,877,589 (71,954) Commissions receivable (29,306) 298,875 Due from officers (24,855) 11,696 Employee and broker receivables (439,682) (533,888) Deferred income taxes (510,888) 109,342 Other assets (712,837) 472,875 Deferred income (300,000) - Securities sold but not yet purchased (71,559) 308,785 Commissions payable 1,199,683 (1,244,220) Accounts payable 467,385 23,504 Accrued expenses 43,069 12,208 Income taxes payable (868,675) 347,846 Other liabilities (359,454) (137,260) -------------- --------------- Total adjustments (75,731) 4,368,175 -------------- --------------- Net cash provided by (used in) operating activities (3,552,767) 5,975,969 -------------- --------------- Cash flows from investing activities: Collection of notes receivable 18,000 74,708 Collection of Global leases receivable 153,641 526,413 Additions to property and equipment (300,432) (711,037) Dispositions of property and equipment - 12,851 -------------- --------------- Net cash used in investing activities (128,791) (97,065) -------------- --------------- Cash flows from financing activities: Payment of notes payable (245,625) (773,172) Payment of subordinated notes payable - (50,000) Proceeds from capital lease financing 606,195 - Payments of capital lease (188,153) (90,936) Exercise of stock options - 55,920 Payments toward purchase of treasury stock (143,564) (973,717) Payments of preferred stock dividends (48,305) (75,782) -------------- --------------- Net cash used in financing activities (19,452) (1,907,687) -------------- --------------- Net increase (decrease) in cash and cash equivalents (3,701,010) 3,971,217 Cash and cash equivalents at beginning of period 3,701,010 686,980 -------------- --------------- Cash and cash equivalents at end of period - 4,658,197 ============== =============== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 118,664 $ 146,801 ============== =============== Income taxes $ 894,331 $ 675,347 ============== =============== Property and equipment financed under capital leases $ 662,290 $ - ============== =============== See notes to financial statements.
06 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001 NOTE 1 - MANAGEMENT REPRESENTATION The accompanying financial statements are unaudited for the interim period, but include all adjustments (consisting only of normal recurring accruals) which management considers necessary for the fair presentation of results at September 30, 2001 and 2000. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could vary from these estimates. These financial statements should be read in conjunction with the Company's Annual Report at, and for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on Form 10-K. The results reflected for the nine-month and three-month periods ended September 30, 2001 are not necessarily indicative of the results for the entire fiscal year to end on December 31, 2001. NOTE 2 - EARNINGS PER SHARE Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from the exercise of stock options and the deemed conversion of preferred stock and convertible debt. NOTE 3 - SHARE REPURCHASE During the nine months ended September 30, 2001, the Company repurchased 236,751 shares of its common stock for $143,564 under a share repurchase program authorized by the board of directors. NOTE 4 - PREFERRED STOCK During the nine months ended September 30, 2001, a total of 18,321 shares of Series A Preferred Stock were converted into 36,642 shares of common stock. NOTE 5 - SALE/LEASEBACK During the nine months ended September 30, 2001, the Company entered into two capital leases under a sale/leaseback arrangement with a leasing company. The transactions resulted in a gain of approximately $45,000, which has been deferred and will amortized over the related lease terms. The leases, totaling $662,000, are together payable in 36 monthly installments of $21,000 and an additional 12 installments of $3,900. NOTE 6 - AMENDED AND RESTATED FISERV FINANCIAL AGREEMENT In May 2000, the Company's broker-dealer subsidiary ("FMSC") entered into a ten year clearing agreement with Fiserv Securities, Inc. ("Fiserv"). In connection with the clearing agreement, FMSC and Fiserv also entered into a financial agreement under which Fiserv was to provide cash advances to FMSC under certain terms and conditions. Upon the conversion of FMSC's accounts to Fiserv in November 2000, it received the initial cash advance of $4,000,000. As of February 1, 2001, the Company and FMSC amended and restated the financial agreement with Fiserv. Under the restated terms, the Company, rather than FMSC, will be the recipient of any additional cash advances payable under the financial agreement. The Company has further assumed FMSC's obligation with respect to the initial payment received in November 2000, and will be solely responsible for any performance and early termination penalties. In consideration of FMSC's release from its obligations under the financial agreement and to secure Fiserv's interest, the Company has granted to Fiserv a first priority lien in all of the outstanding shares of FMSC that it owns. 07 NOTE 7 - LEGAL MATTERS During the third quarter of 2001, the Company's broker-dealer subsidiary (FMSC) resolved a previously disclosed customer claim in which the customer sought damages in excess of $19 million. FMSC is a respondent or co-respondent in various other legal proceedings incidental to its securities business. FMSC is contesting the allegations of these claims and believes that there are meritorious defenses in each case. In view of the inherent difficulty of predicting the outcome of litigation, management is unable to derive a meaningful estimate of the amount or range of possible loss that may arise out of pending legal proceedings in any particular quarterly or annual period, or in the aggregate. However, it is possible that the ultimate outcome of these matters could have a material adverse impact on the Company's financial condition, results of operations, and cash flows. NOTE 8 - INCOME TAXES During the nine months ended September 30, 2001, management increased the Company's deferred tax valuation allowance by $810,000 to offset additional tax benefits whose realization is uncertain. These tax assets relate to stock option compensation, state net operating losses, and deferred income. 08 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended September 30, 2001 (the "2001 Period") vs. September 30, 2000 (the "2000 Period") Three Months Ended September 2001 2000 (000's) % Change (000's) ------------------------------------------- Revenues: Commissions $ 8,207 (19) $ 10,123 Principal transactions 1,540 26 1,226 Investment banking 1,028 53 670 Interest and other income 1,418 117 652 --------------------------------------- $ 12,193 (4) $ 12,671 Three Months Ended September 2001 2000 (000's) % Change (000's) ------------------------------------------ Expenses: Commissions, compensation and benefits $ 10,055 (6) $ 10,672 Clearing and floor brokerage 731 (17) 878 Communications and occupancy 887 (45) 611 Legal matters and related costs 1,389 458 249 Other operating expenses 953 17 817 Interest 44 38 32 --------------------------------------- $ 14,059 6 $ 13,259
During the nine-month period ending September 30, 2001, the securities industry sustained declines in revenues, resulting from a sluggish global economy and investor uncertainty. The Company's results in both 2001 and particularly the second half of 2000 reflect declining trading volume in the U.S. financial markets, and generally bearish investor sentiment. For the three months ended September 30, 2001, the Company's revenues decreased 4% to $12,193,000 compared with $12,671,000 for the 2000 period. For the nine months ended September 30, 2001, the Company recorded revenue of $38,514,000, down from $50,504,000 over the nine-month period of 2000. The Company's primary source of revenue is derived from commissions generated on listed and over-the-counter securities and other agency transactions. These revenues during the 2001 period were $8,207,000 (67% of total revenues) compared to $10,123,000 (80% of total revenues) for the 2000 period. Commission revenue from the sale of mutual funds, insurance products, and fees from managed accounts decreased by $615,000 to $2,974,000 (24% of total revenues) during the 2001 period from $3,589,000 (28% of total revenues) for the 2000 period. The decrease in mutual fund revenues during the 2001 period was partially offset by the increase in commissions from the sale of variable annuities and fees from managed accounts. Revenues from these two areas increased by $222,000 for the 2001 period when compared to the 2000 period. Gains from proprietary trading and market-making activities increased by 26%, or $314,000, over the 2000 period. Principal transactions in equity securities accounted for most of the increase ($297,000) over the 2000 period. During the 2001 quarter, the Company reduced its market-making and proprietary trading activities, eliminating personnel costs and market data services. The Company also reduced its inventory positions in order to limit further its exposure to market volatility. Investment banking revenues increased during the 2001 period by $359,000, or 54%, to $1,028,000, when compared with the 2000 period. Included in this category is commissions earned from the sale of registered offerings of collateralized medical receivables, which the Company began selling during the second half of this year. 09 Interest and other income for the 2001 period increased by $765,000 to $1,418,000. This was largely due to an insurance reimbursement of $512,000 and an increase in interest income. Compensation and benefits decreased during the 2001 period by 6% or $616,000 to $10,055,000. Commissions paid to registered representatives for 2001 were $8,092,000 (66% of total revenues) as compared to $8,798,000 (69% of total revenues) in 2000, a decrease of $706,000. The decrease in commission expense reflects the overall decrease in commission-generated revenues. Although total revenues stayed fairly constant for the 2001 period, commission generated revenues actually decreased by $1,070,000. The other expenses in this category include salaries, payroll taxes, and fringe benefits for salaried employees. Employee compensation and employee benefits remained relatively constant, increasing by only $89,000 over the 2000 period. During this period, the Company implemented certain cost cutting measures, including the reduction in executive officers' salaries and personnel layoffs in the trading and operations departments. The Company expects to realize the full extent of these cost reductions during the fourth quarter of 2001. Clearing costs decreased during the 2001 period. This cost, which is directly associated with the level of transaction volume, decreased by $148,000 to $731,000 (6% of total revenues) from $878,000 (7% of revenues) during the 2000 period. These clearing costs, can and do fluctuate, depending upon the product mix. Some transactions, such as options and bonds, have a higher execution and clearing cost than mutual funds and insurance. Communications and occupancy costs were $887,000 (7% of total revenues) for the 2001 period as compared to $611,000 (5% of total revenues) for the 2000 period. During the third quarter of 2001, the Company entered into two new leases for branch offices in Boca Raton, Florida and New York City. As a result of these new offices, as well as rent increases on current office space, rental expense increased by approximately $148,000. Subsequent to the quarter, the Company sublet its office space in Paramus, New Jersey, which formerly housed the operations of Century Discount Investments ("CDI"). The CDI staff was relocated to the Red Bank headquarters. As a result of this move, the Company anticipate savings of approximately $6,000 per month. Other operating expenses increased by $136,000, to $953,000 (8% of total revenues) as compared to $817,000 (6% of total revenues) during the 2000 period. The increase is due primarily to higher customer and broker bad debt reserves. Legal fees and litigation settlements increased to $1,390,000 from $249,000, an increase of $1,141,000 over the 2000 period. The Company is currently a respondent in various customer arbitrations and lawsuits arising in the normal course of its securities business. In view of the inherent difficulty of predicting the outcome of litigation, management is unable to derive a meaningful estimate of the amount or range of possible loss that may arise out of pending legal proceedings in any particular quarterly or annual period, or in the aggregate. However, it is possible that the ultimate outcome of these matters could have a material adverse impact on the Company's financial condition, results of operations, and cash flows. The Company has not incurred any income tax liabilities in 2001. Management, however, has increased the Company's deferred tax valuation allowance by $810,000 to offset additional tax benefits whose realization is uncertain. These tax assets relate to stock option compensation, state net operating losses, and deferred income. For the 2001 period, the Company reported a net loss of $2,099,000 or ($.24) per basic and diluted share, as compared to a net loss of $415,000 or ($.04) per basic and diluted share for the 2000 period. For the nine months ended September 30, 2001, the Company reported a net loss of $3,550,000 or ($.41) per basic and diluted share, as compared to net income of $1,532,000 or $.16 per basic and $.15 per diluted share for the nine months ended September 30, 2000. 10 Liquidity and Capital Resources The Company maintains a liquid balance sheet with 41% of the Company's assets consisting of cash and cash equivalents; securities owned, which are marked to market; and receivables from the Company's clearing firm and other broker-dealers. The Company's liquidity can fluctuate significantly depending largely upon general economic and market conditions, volume of activity, and investment opportunities. Net cash used by operating activities for the nine months was $3,552,767. The primary source of this decrease was the net loss for the nine months ended September 30, 2001, of $3,477,000. Investing activities required cash of $129,000 over the last nine months. Additions to capital expenditures consumed $300,000, while collections of notes and global lease receivables contributed $172,000. The Company projects additional expenditures for infrastructure and technology to be approximately $100,000 for the remainder of the year. Financing activities used cash of $19,000 during the first nine months of 2001. A total of $606,000 of proceeds was received from capital lease financing. This was offset by notes and capital lease repayments of $434,000 and dividend payments to preferred shareholders of $48,000. In addition, a total of $144,000 was used to repurchase 236,751 of the Company's outstanding shares pursuant to a stock repurchase program. In May 2000, the Company's broker-dealer subsidiary ("FMSC") entered into a 10-year clearing agreement with Fiserv Securities, Inc. ("Fiserv"). In connection with the clearing agreement, FMSC and Fiserv also entered into a financial agreement under which Fiserv was to provide cash advances to FMSC under certain terms and conditions. Upon the conversion of FMSC's accounts to Fiserv in November 2000, it received the initial cash advance of $4,000,000. As of February 1, 2001, the Company and FMSC amended and restated the financial agreement with Fiserv. Under the restated terms, the Company, rather than FMSC, will be the recipient of any additional cash advances payable under the financial agreement. The Company expects an additional cash payment of $1,250,000 in November 2001, having achieved the performance criteria required for such payment. Factors Affecting "Forward-Looking Statements" From time to time, the Company may publish "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, or make oral statements that constitute forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products, anticipated market performance, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. These risks and uncertainties, many of which are beyond the Company's control, include, but are not limited to: (i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements which could affect the cost of doing business, (v) fluctuations in currency rates, (vi) general economic conditions, both domestic and international, (vii) changes in the rate 11 of inflation and related impact on securities markets, (viii) competition from existing financial institutions and other participants in competition from existing financial institutions and other participants in the securities markets, (ix) legal developments affecting the litigation experience of the securities industry, and (x) changes in federal and state tax laws which could affect the popularity of products sold by the Company. The Company does not undertake any obligation to publicly update or revise any forward-looking statements. The reader is referred to the Company's previous filings on Form 10-Q for the periods ended March 31, 2001 and June 30, 2001 and the Form 10-K for the year ended December 31, 2000. Recently Issued Pronouncements In June 2001, the FASB issued SFAS No. 141, Business Combinations, which addressed the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 141 requires the purchase method of accounting to be used for business combinations initiated after June 30, 2001 and eliminates the pooling of interest method. The adoption of this statement is not expected to have a material impact on the Company's financial position or results of operations. In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which addressed the recognition and measurement of goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 also addressed the initial recognition and measurement of intangible assets acquired outside of a business combination whether acquired individually or with a group of other assets. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that intangible assets with indefinite lives and goodwill will not be amortized, but will rather be tested at least annually for impairment. Although SFAS No. 142 is not required to be adopted by the Company until fiscal 2003, its provisions must be applied to goodwill and other intangible assets acquired after June 30, 2001. As of September 30, 2001, the Company does not have any goodwill or other intangible assets relating to business combinations that were accounted for under APB Opinion No. 16. Accordingly, the adoption of SFAS No. 142 is not expected to have a material impact on the Company's financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addressed the retirement of tangible long-lived assets and the associated asset retirement costs. The Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002, but may be implemented earlier. The adoption of SFAS No. 143 is not expected to have a material impact on the Company's financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Statement requires a single accounting model to be used for long-lived assets to be disposed of by sale, and broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, but may be implemented earlier. The adoption of SFAS No. 144 is not expected to have a material impact on the Company's financial position or results of operations. 12 PART II OTHER INFORMATION Item 5. Other Information. Stock Repurchase Program During the quarter ended September 30, 2001, the Company repurchased 122,201 shares of its common stock for $55,250 under a share repurchase program authorized by the Board of Directors. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits None. (b) Reports on Form 8-K There were no reports on Form 8-K filed. 13 SIGNATURES 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. FIRST MONTAUK FINANCIAL CORP. (Registrant) Dated: November 14, 2001 /s/ William J. Kurinsky ---------------------------------- William J. Kurinsky Secretary/Treasurer Chief Financial Officer and Principal Accounting Officer /s/ Herbert Kurinsky ---------------------------------- Herbert Kurinsky President 14 First Montauk Financial Corp. Computation of Earnings Per Share Nine months ended September 30, Three months ended September 30, 2001 2000 2001 2000 Numerator: Basic: Income (loss) before extraordinary loss $(3,477,036) $ 1,641,994 $(2,074,463) $ (390,171) Extraordinary loss - (34,200) - - ----------- ---------- ----------- ---------- Net income (loss) (3,477,036) 1,607,794 (2,074,463) (390,171) Deductions: Preferred stock dividends (73,145) (75,784) (24,840) (24,705) ---------- ---------- ----------- ---------- Net income (loss) for basic computation $(3,550,181) $ 1,532,010 $(2,099,303) $ (414,876) =========== ========== =========== ========== Diluted: Net income (loss) for basic computation $(3,550,181) $ 1,532,010 $(2,099,303) $ - Additions: Preferred stock dividends - 75,784 - - Interest on convertible debt, net of taxes - 16,746 - - ----------- --------- ----------- ----------- Net income (loss) for diluted computation $(3,550,181) $ 1,624,540 $(2,099,303) $ - =========== ========== =========== =========== Denominator: Basic: Weighted average common shares outstanding 8,731,099 9,560,256 8,714,904 9,394,457 =========== ========== =========== =========== Diluted: Weighted average common shares outstanding-basic 8,731,099 9,560,256 8,714,904 9,394,457 Additions: Incremental shares from assumed conversion of stock options and warrants using the treasury stock method - 245,193 - - Incremental shares from assumed conversion of convertible debt and preferred stock using the if-converted method - 1,213,174 - - ----------- ---------- ----------- ---------- Weighted average common and common equivalent shares outstanding-diluted 8,731,099 11,018,623 8,714,904 9,394,457 =========== =========== =========== ========== Per share: Basic: Before extraordinary loss $ (.41) $ 0.16 $ (.24) $ (0.04) Extraordinary loss - - - - ---------- ----------- ----------- ---------- Net income (loss) $ (.41) $ 0.16 $ (.24) $ (0.04) ========== ========== =========== =========== Diluted Before extraordinary loss $ (.41) $ 0.15 $ (.24) $ (0.04) Extraordinary loss - - - - ---------- ---------- ----------- ----------- Net income (loss) $ (.41) $ 0.15 $ (.24) $ (0.04) ========== ========== =========== ===========