-----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, GUTdl/DP1UyRW2iocz4uhJSgawr0F8tlORYv08xbnXSnb9dHYuEEhx+IvQ0Z7tnM UxMsUeCcvhTYYma6s763xA== 0000083125-99-000009.txt : 19990813 0000083125-99-000009.hdr.sgml : 19990813 ACCESSION NUMBER: 0000083125-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST MONTAUK FINANCIAL CORP CENTRAL INDEX KEY: 0000083125 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 221737915 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06729 FILM NUMBER: 99685736 BUSINESS ADDRESS: STREET 1: 328 NEWMAN SPRINGS RD STREET 2: PKWY 109 OFFICE CTR CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 7328424700 MAIL ADDRESS: STREET 1: 328 NEWMAN SPRINGS RD STREET 2: PKWY 109 OFFICE CTR CITY: RED BANK STATE: NJ ZIP: 07701 FORMER COMPANY: FORMER CONFORMED NAME: MCC PRESIDENTIAL INC DATE OF NAME CHANGE: 19871203 FORMER COMPANY: FORMER CONFORMED NAME: RENAULT WINERY INC DATE OF NAME CHANGE: 19740725 FORMER COMPANY: FORMER CONFORMED NAME: PRESIDENTIAL APARTMENTS INC DATE OF NAME CHANGE: 19740327 10-Q 1 QUARTERLY REPORT 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 June 30, 1999 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 9,920,727 Common Shares, no par value were outstanding as of August 12, 1999. Page 1 of 11 02 FIRST MONTAUK FINANCIAL CORP FORM 10-Q JUNE 30, 1999 INDEX Page PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Statements of Financial Condition as of June 30, 1999 and December 31, 1998 ....... 3 Consolidated Statements of Income (Loss) for the Six Months ended June 30, 1999 and 1998 and Three months ended June 30, 1999 and 1998 ..... 4 Consolidated Statements of Cash Flows for the Six Months ended June 30, 1999 and 1998 ... 5 Notes to Financial Statements ..................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .... 7-9 PART II. OTHER INFORMATION: Item 5. Other Information........................... 10 Item 6. Exhibits and Reports on Form 8-K............ 10 Signatures .......................................... 11 03 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION ASSETS 1999 1998 Cash $ 861,976 $ 613,513 Due from clearing firm 1,424,447 2,876,202 Securities owned, at market 6,077,070 2,685,879 Securities owned, not readily marketable, at estimated market value 40,317 47,381 Commissions receivable 64,291 250,803 Employee and broker receivables 444,974 598,212 Furniture, equipment and leasehold improvements-net 2,117,133 2,074,470 Notes receivable 647,461 477,729 Due from officers 131,408 131,501 Other assets 1,069,385 1,087,289 Deferred tax asset-net 1,212,086 700,755 --------- ------- Total assets $ 14,090,548 $ 11,543,734 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Securities sold, but not yet purchased, at market $ 394,402 $ 327,047 Notes payable-bank 196,881 244,844 Subordinated notes payable 150,000 200,000 Bonds payable 480,666 473,625 Capital lease payable 318,901 373,579 Commissions payable 1,815,893 1,531,644 Accounts payable 759,008 802,497 Income taxes payable 623,417 - Accrued expenses 930,480 905,154 Other liabilities 662,613 461,717 ------- ------- Total liabilities 6,332,261 5,320,107 --------- --------- Common stock issued with guaranteed selling price - no par value, 18,000 shares issued and outstanding 36,500 36,500 Commitments and contingencies (See Notes) Stockholders' equity Preferred Stock, 5,000,000 shares authorized, $.10 par value, no shares issued and outstanding - - Common Stock, no par value, 30,000,000 shares authorized, 9,850,727 and 9,629,044 shares issued and outstanding 5,067,323 4,980,977 Additional paid-in capital 2,991,179 2,979,831 Retained earnings (Accumulated deficit) 165,233 (1,192,471) Less: Deferred compensation (501,948) (581,210) -------- -------- Total stockholders' equity 7,721,787 6,187,127 --------- --------- Total liabilities and stockholders' equity $ 14,090,548 $ 11,543,734 ============= ============= See notes to financial statements. 04 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) Six months ended June 30, Three months ended June 30, 1999 1998 1999 1998 Revenues: Commissions $ 19,977,955 $15,441,811 $ 10,200,487 $ 7,814,041 Principal transactions 6,540,243 4,402,917 4,274,159 2,059,474 Investment banking 182,161 601,252 105,137 335,048 Interest and other income 889,356 793,809 488,632 415,272 ------- ------- ------- ------- 27,589,715 21,239,789 15,068,415 10,623,835 ---------- ---------- ---------- ---------- Expenses: Commissions, employee compensation and benefits 20,319,229 16,263,930 10,828,950 8,028,111 Clearing and floor brokerage 2,265,776 1,742,243 1,156,841 895,760 Communications and occupancy 1,290,767 1,180,905 649,732 583,914 Legal matters and related costs 662,254 1,360,076 615,696 1,059,502 Writedown of Note Receivable -Global Financial Corp. - 875,000 - 875,000 Other operating expenses 1,496,559 1,553,901 955,714 982,587 Interest 82,794 66,053 40,067 37,483 ---------- ---------- ---------- ---------- 26,117,379 23,042,108 14,247,000 12,462,357 ---------- ---------- ---------- ---------- Income (loss) before income taxes 1,472,336 (1,802,319) 821,415 (1,838,522) Income taxes 115,298 (595,578) 112,346 (611,603) --------- ---------- ---------- ----------- Net income (loss) $ 1,357,038 $ (1,206,741) $ 709,069 $(1,226,919) =========== ============ ============ =========== Per share of Common Stock: Basic $ 0.14 $ (0.13) $ 0.07 $ (0.13) =========== ============ ============ =========== Diluted $ 0.13 $ (0.13) $ 0.07 $ (0.13) =========== ============ ============ =========== Number of common shares used in basic income (loss) per share 9,866,057 9,643,166 9,895,643 9,664,113 Incremental shares from assumed conversion of options 739,754 - 802,290 - ----------- ---------- ----------- --------- Number of common shares used in diluted income (loss) per share 10,605,811 9,643,166 10,697,933 9,664,113 =========== ========= ========== ========= See notes to financial statements. 05 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1999 1998 INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income (loss) $ 1,357,038 $ (1,206,741) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Tax benefit related to exercise of stock options - 150,003 Depreciation and amortization 201,192 162,982 Amortization of deferred compensation 90,609 93,552 Loan reserves - 875,000 Amortization of bond discount 7,041 - Other - 22,000 Increase (decrease) in cash attributable to changes in assets and liabilities Due from clearing firm 1,451,755 (521,265) Securities owned - at market (3,391,191) 489,818 Securities owned-not readily marketable 7,064 439,303 Commissions receivable 186,512 188,949 Other assets 17,904 (502,441) Deferred income taxes (511,331) (635,698) Securities sold but not yet purchased 67,355 (680,308) Commissions payable 284,249 (265,987) Accounts payable (42,562) 426,350 Income taxes payable 623,417 - Accrued expenses 25,066 522,648 Other liabilities 200,896 366,127 ------- ------- Total adjustments (782,024) 1,131,033 -------- --------- Net cash provided by (used in) operating activities 575,014 (75,708) -------- --------- Cash flows from investing activities: Due from officers 93 5,791 Employee and broker receivables 153,238 139,311 Issuance of notes receivable (243,616) (1,459,364) Repayment of notes receivable 73,884 603,759 Capital expenditures (243,855) (665,983) -------- ---------- Net cash used in investing activities (260,256) (1,376,486) -------- ---------- Cash flows from financing activities: Payment of notes payable-bank (47,963) (47,963) Payment of subordinated notes payable (50,000) (50,000) Payment of capital lease payable (54,678) - Proceeds from rights offering - 1,382,751 Registration costs - (113,518) Proceeds from exercise of common stock options 86,346 319,310 --------- --------- Net cash provided by (used in) financing activities (66,295) 1,490,580 --------- ----------- Net increase in cash 248,463 38,386 Cash at beginning of year 613,513 789,883 --------- ----------- Cash at end of period $ 861,976 $ 828,269 ========= =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 82,794 $ 66,053 Income taxes $ 2,952 $ - Transfer of temporary equity to permanent capital $ - $ 140,000 See notes to financial statements. 06 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 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 June 30, 1999 and 1998. 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 31,1998, as filed with the Securities and Exchange Commission on Form 10-K. The results reflected for the six-month and three-month periods ended June 30, 1999, are not necessarily indicative of the results for the entire fiscal year to end on December 31, 1999. 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 or conversion of other securities into common stock. NOTE 3 - EXCHANGE OFFERING In April 1999, the Company advised Global Financial Corp. ("Global") that as of April 30, 1999 it would no longer provide financial assistance to Global. In May 1999, the Company submitted a buy-out plan to leaseholders holding Global leases on May 1, 1999. The plan has been structured as a private exchange offering, whereby the Company will issue shares of a 6% Series A Convertible Preferred Stock in exchange for an assignment of the Global leases. The Company will exchange one share of Preferred Stock for every $5.00 of payments, as adjusted, remaining on each lease interest. The preferred shares will be convertible into two shares of the Company's common stock at the rate of $2.50 per share. Provided the Company has registered the underlying common shares and the closing stock price of the Common Stock is at least $3.50 per share for twenty consecutive trading days, conversion will automatically take place. The Preferred Stock will pay a quarterly dividend of $.075 per share. The Company has not yet determined the dollar value of the lease interests exchanged, nor the number of preferred shares to be issued. NOTE 4 - INCOME TAXES Based on its review of current operating results and other factors, management believes that it is more likely than not that the tax benefits from net operating losses and other deferred tax assets will be realized. Accordingly, as of June 30, 1999 the Company has recorded a net reversal of $367,000 of federal tax valuation allowances and $119,000 of state tax valuation allowances to offset tax provisions accrued on current taxable income. 07 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For the three months ended June 30, 1999, the Company achieved record revenues of $15,068,000, an increase of 42% over the second quarter of 1998. This was the second consecutive quarter of record revenues for the Company. During the six month period ended June 30, 1999, total revenues were $27,590,000, an increase of 30% over the 1998 comparable period. Continued strength in the equity markets as reflected in transaction volume and stock prices, as well as the addition of new affiliate brokers, helped contribute to the record results. Commission revenues from the sale of listed and over-the-counter securities, mutual funds, fees from managed accounts and other agency transactions increased to $19,978,000 (72% of total revenues) during the first half of 1999, from $15,442,000 (73% of total revenues) during the comparable 1998 period. For the second quarter of 1999, commission revenues rose to $10,200,000 (68% of total revenues) from $7,814,000 (74% of total revenues) during the same period in 1998. Most of the increase was attributable to gains in commissions from equity trades and mutual fund investments. The largest percentage revenue increase was in the area of principal transactions, which rose from $2,059,000 in the second quarter of 1998 to $4,274,000 during the same period in 1999, an increase of over 100%. For the six month period the increase was $2,137,000, or 48% over the comparable period in 1998. This was due to significant increases in market-making and proprietary trading in over-the-counter equity and debt securities, as well as unrealized gains on inventory positions. The value of securities held in inventory can and do fluctuate significantly from period to period. Compensation and benefits increased 25% over the comparable six month period of the prior year. This category includes salaries, commission expense, payroll taxes and fringe benefits for salaried employees. Commissions paid to registered representatives for the first half of 1999 was $17,265,000 (63% of total revenues) as compared to $13,572,000 (64% of total revenues) in the first half of 1998. The increase is directly related to the higher level of agency trades transacted by the Company's registered representatives. Commission expense as a percentage of total revenues will fluctuate within a narrow range depending upon the product mix of commission-based business and principal transactions. This percentage will also fluctuate based upon the contribution to revenues from the Company's in-house brokers and affiliated registered representatives. In-house brokers usually receive a lower commission payout than independent affiliates but are not generally required to pay their own overhead. For the six months ended June 30, 1999, the Company paid salaries of $2,391,000 for management, operations and trading and clerical personnel, as compared to $2,074,000 in the first half of 1998. Salaries paid for the second quarter of 1999 were $1,243,000, compared with $1,040,000 for the second quarter of 1998. This increase reflects the overall growth of support staff required for current operations. Salaries are projected to increase for the balance of the year due to the hiring of a Chief Sales Officer and other sales and marketing professionals in the third quarter of 1999. Clearing costs increased for the first six months in 1999 to $2,266,000 (8% of total revenues) from $1,742,000 (8% of total revenues) in 1998. The dollar increase in clearing costs was attributable to higher transactions volume, but was partially offset by clearing discounts and rebates. The percentage of clearing costs to gross revenues remained constant, but can fluctuate depending upon the product mix. Some transactions, such as options and bonds, have a higher execution and clearing cost than others. Both data communications and occupancy costs exceeded the prior year, reflecting the Company's growth. The increase of $110,000, or 9%, to $1,291,000 over the comparable 1998 six month period, is primarily due to the increase in rent expense for the Company's expanded headquarters. Higher communications and market data service costs associated with the growth in business activity also contributed to the increase. The Company has experienced a major reduction in the category of legal fees and settlements in 1999. Whereas the total expense for the 1998 six month period was $1,360,000, or 6% of total revenues, the 1999 corresponding period declined to $662,000, or 2% of total revenues. Through enhanced supervision and compliance measures, the Company has made progress towards reducing its exposure to customer claims arising out of securities activities. The Company is currently a respondent in various customer claims arising in the normal course of its securities business; however, none of these claims is expected to have a material impact on its financial condition or operating results. 08 In 1998 management began a full review of the collectibility of the Company's loans to Global Financial Corp. ("Global"). Based on various events and circumstances, including the default status of the loans, management determined that the loans had been impaired and a reserve for uncollectibility of $875,000 was required at June 30, 1998. The reserve was increased to $1,775,000 in the fourth quarter of 1998. (See "Liquidity and Capital Resources" for further discussion of Global matters.) Other operating expenses decreased by $57,000 to $1,497,000 (5% of total revenues) during the first six months of 1999 when compared to the same period in 1998. Cost stability during this period was achieved by the reduction in advertising costs. The advertising and marketing campaigns, which were completed and expensed in 1998, are continuing to produce results in registered representative recruitment and name recognition. However, the Company expects the cost for advertising and recruitment to increase for the remainder of the fiscal year, as it launches new advertising and business development campaigns for its brokerage operations, particularly its discount brokerage division, and incurs other costs associated with branding efforts. The effective income tax rates for the six months and three months ended June 30, 1999 were 7.8% and 13.7%, respectively, as compared to 33% in the respective 1998 periods. Tax provisions accrued at regular statutory rates on 1999 income have been offset in part by the reversal of valuation allowances established in fiscal 1998, because management currently believes that the tax benefits provided by deferred tax assets will be realized. Management expects that tax expense on additional 1999 income will be accrued at rates ranging from 35% to 40%. For the six month period, the Company reported net income of $1,357,000, or $.14 and $.13 per basic and diluted share, respectively, as compared to a loss of ($1,207,000), or ($.13) per basic and diluted share for the 1998 comparable period. Net income for the 1999 second quarter was $709,000, or $.07 per basic and diluted share, as compared to a loss of ($1,227,000), or ($.13) per basic and diluted share in the second quarter of 1998. Operating results will continue to be dependent upon general economic and securities market conditions, and management's ability to continue to recruit productive registered representatives and to contain administrative and legal costs. Liquidity and Capital Resources The Company maintains a highly liquid balance sheet with 60% of the Company's assets consisting of cash and cash equivalents, securities owned, and receivables from the Company's clearing firm and other broker-dealers. Market-making and other securities dealer activities require the Company to carry significant levels of securities inventory in order to meet customer and internal trading needs. The balances in the Company's cash, inventory and clearing firm accounts can and do fluctuate significantly from day to day, depending on market conditions, daily trading activity, and investment opportunities. The Company monitors these accounts on a daily basis in order to ensure compliance with regulatory capital requirements and to preserve liquidity. Net cash provided by operating activities for the six months was $575,000. The primary source of this increase was net income for the six months of $1,357,000, the reduction in the clearing firm receivable of $1,452,000, and an increase in accrued liabilities of $1,091,000. The net increase in securities inventories of $3,324,000 was an offsetting factor. Investing and financing activities required cash of $327,000 over the last six months. Additions to capital expenditures consumed $243,000, most of which was for the renovation of the newly acquired space at the headquarters complex, as well as the purchase of additional computer and technology equipment. The Company projects additional expenditures for infrastructure and technology, including the planned new corporate office in Richmond, Virginia, to be approximately $450,000 for the remainder of fiscal 1999. Debt repayments used cash of $153,000, while proceeds from the exercise of common stock options provided cash of $86,000. 09 In October 1998, the Company issued a series of Convertible Promissory Notes aggregating $570,000 to a private investor in consideration of $300,000 in cash and an income stream from equipment lease investments with a remaining balance of approximately $270,000. The notes carry interest at the rate of 10% per annum, payable semi-annually on April 1 and October 1 of each year, and are convertible into a maximum of 380,000 shares of the Company's Common Stock at the rate of $1.50 per share. The notes mature in five years; however, with respect to one note in the principal amount of $300,000, the Company is required to pay 20% of the original outstanding principal amount into a sinking fund on or before each annual anniversary date of the Notes. Thus, the Company will be required to deposit $60,000 by October 1, 1999 into the sinking fund for the retirement of this note. In April 1999, the Company advised Global that as of April 30, 1999 it would no longer provide financial assistance to Global. In May 1999, the Company submitted a buy-out plan to leaseholders holding Global leases on May 1, 1999. The plan has been structured as a private exchange offering, whereby the Company will issue 6% Series A Convertible Preferred Stock in exchange for an assignment of the Global leases. The Company will exchange one share of Preferred Stock for every $5.00 of payments, as adjusted, remaining on each lease interest. The preferred shares will be convertible into two shares of the Company's common stock at the rate of $2.50 per share. The preferred stock is automatically converted into common stock if (1) the Company has registered the underlying common shares for public distribution and (2) the closing price of the common stock is at least $3.50 per share for twenty (20) consecutive trading days. The Preferred Stock will pay a quarterly dividend of $.075 per share. The Company has not yet determined the dollar value of the lease interests exchanged, or the number of preferred shares to be issued. Leaseholders who accept the exchange offering will assign all rights to their leases, and will sign a general release and assignment of claims to the Company. There is no assurance as to the dollar amount or collectibility of any lease payments that may be acquired by the Company as a result of the exchange offering. Management believes that operating income will satisfy the Company's liquidity needs, at least through the current fiscal year. Year 2000 Issue The onset of the year 2000 brings challenges to companies who use and rely on computers and technology as a function of their businesses. Many existing computer programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer systems could malfunction and lead to significant business delays and disruptions in the U.S. and internationally by or at the year 2000. The Company has reviewed its compliance with what has come to be known as the Year 2000 Issue ("Y2K"). The Company does not create or develop its own proprietary computer programs. Rather, it is reliant on outside vendors or providers for verification of the compliance of their applications, which are utilized by the Company. The Company has currently identified 17 programs and applications that were purchased/licensed by the Company for various departments as mission critical systems requiring compliance with Y2K. We have requested each vendor to supply verification that the program and/or application utilized by the firm is, or will be, Y2K compliant before the Year 2000. To date, none of these vendors have failed to provide a statement of compliance. The most significant of these outside vendors is the Company's clearing firm, Schroder & Co., Inc. Schroder & Co. has been mandated by the NYSE to participate in industry testing of all computer interfaces relating to securities processing. These tests have been ongoing since early Spring 1999. To date, the Company has not been advised of any problems relating to the clearing firm's compliance with Y2K readiness. The Company has participated with Schroder in point to point testing of their interfaces and applications. These tests were successfully completed in June 1999. The Company has designated an individual within the organization to coordinate the Y2K compliance issues and to communicate with each software and service provider, to ensure Y2K compliance before the turn of the century. While management has not finalized an estimate of the cost of internal system modifications, it does not believe that these costs will have a material impact on the Company's operations in fiscal 1999. In addition, FMSC inventoried its computer and systems operations that could be affected by Y2K issues, including steps to remediate systems requiring such attention. This has included a review of our facilities, office equipment, telecommunications systems, market data services and third-party products and services used by our company, and retention of consultants, where necessary. During February 1999, FMSC issued a letter to securities account clients reporting on the progress of its Y2K readiness program. The Company is working to take the necessary steps to ensure, as far as practicable, that the firm's systems will function without interruption after the millennium change. FMSC expects to continue its evaluation process relating to contingency planning. 10 PART II OTHER INFORMATION Item 5. Other Information. Leaseholder Private Offering During the quarter the Company commenced a private offering for the purposes of offering to buy-out the leaseholders holding Global leases on May 1, 1999. The Company has offered to purchase all Global leases in exchange for shares of Series A Convertible Preferred Stock paying a cash dividend of 6% per annum. The preferred stock is convertible into two shares of the Company's common stock at the rate of $2.50 per share. The preferred stock is automatically converted into common stock if (1) the Company has registered the underlying common shares for public distribution and (2) the closing price of the common stock is at least $3.50 per share for twenty (20) consecutive trading days. Leaseholders who accept the exchange offering will assign all rights to their leases, and will sign a general release and assignment of claims to the Company. There is no assurance as to the dollar amount or collectibility of any lease payments that may be acquired by the Company as a result of the exchange offering. The Company has not yet determined the dollar value of the lease interests exchanged nor the total number of preferred shares to be issued. The securities offered in the exchange offering have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. 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. 11 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: August 12, 1999 /s/ William J. Kurinsky ---------------------------------- William J. Kurinsky Secretary/Treasurer Chief Financial Officer and Principal Accounting Officer /s/ Herbert Kurinsky ---------------------------------- Herbert Kurinsky President 12 EXHIBIT INDEX ------------- Exhibit 27 - Financial Data Schedule EX-27 2 FDS --
BD (Replace this text with the legend) 0000083125 First Montauk Financial Corp. 1,000 3-mos Dec-31-1999 Apr-1-1999 Jun-30-1999 862 1489 0 0 6077 2117 14091 0 3198 0 0 394 2740 0 0 5067 2654 14091 4274 489 10200 105 0 40 10829 821 821 0 0 709 .07 .07
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